For CVS CEO, Tobacco Decision Reflects Health Care Priorities

CVS CEO and President Larry Merlo joins Audie Cornish to discuss his company's big decision to eventually discontinue its sales of tobacco products. The decision didn't simply make headlines on Wednesday; it could also signal a shift in plans for the pharmacy giant's future.

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AUDIE CORNISH, HOST:

We heard a little bit there at the top of Yuki's story from CVS's president and CEO Larry Merlo. Well, he joins us now to answer a few more questions about this decision and what it says about where his company is headed. Welcome to the program.

LARRY MERLO: Good afternoon, Audie.

CORNISH: So we just heard that you'll lose about $2 billion in revenue by not selling cigarettes. What effect will that have on your bottom line?

MERLO: Well, Audie, it represents about 3 percent of our profits, but, you know, this decision is about much more than that. It's about where we're headed as an organization, you know, where we expect to be in the future as a healthcare company and it became clear to us that, you know, this is the right decision at the right time. Our business outlook is health and healthcare's evolving, and this decision positions us for a growing role in our healthcare system.

CORNISH: So you talk about the future of CVS as a healthcare company, but what exactly does that mean?

MERLO: Well, as you look across, you know, healthcare, there are many, many aspects of healthcare that are changing. There's a growing focus and emphasis on, you know, healthy outcomes, managing chronic disease and about half of allAmericans today suffer from one or more chronic diseases, as well as a focus on controlling and actually reducing overall healthcare costs.

And we have 26,000 pharmacists and nurse practitioners who are helping millions of patients every day across the country manage conditions like high blood pressure, high cholesterol, diabetes, all conditions that are exacerbated by the effects of smoking. And when we think about the role that our pharmacists and nurse practitioners are playing, extending the front lines of healthcare into the community, you know, they're the most accessible, you know, healthcare professionals, it's pretty clear to us that selling tobacco is an absolute contradiction of delivering healthcare in a retail environment.

CORNISH: At the same time, listeners will hear you talk about diabetes and high cholesterol, and wonder why CVS isn't dropping the sugary snacks or the high sodium snacks that are also packing the aisles.

MERLO: Well, Audie, it's a great point. And when you look at some of those other products, it's important to differentiate a bar of chocolate from a pack of cigarettes. And those products, whether you're talking about a candy bar or a bag of chips, you know, in occasional use, taken in moderation, a dietician would tell you that's OK.

The same cannot be said about a pack of cigarettes. There, you know, is nothing safe about any amount of use of tobacco. And I think that's what makes those products different and tobacco continues to be a leading cause of illness and death in the country and we think that, you know, there's more that we can do as a healthcare company.

CORNISH: Now, as you move forward in trying to be a healthcare company, does that mean you're going to get involved more in the health insurance business, where you have doctors in the store one day? How far are you guys going to go with this?

MERLO: Well, it's interesting to note that today we operate about 800 medi-clinics within our CVS Pharmacy stores. They're staffed by nurse practitioners who are physician assistants and, you know, they're seeing patients with common illnesses, whether it's strep throat, poison ivy and, you know, we're beginning to do more in terms of, you know, helping people manage their chronic diseases.

We talked about high blood pressure and diabetes earlier as two examples. We have plans to continue the expansion of medi-clinic. We expect to have 1500 medi-clinics located in CVS Pharmacies, you know, over the next three to four years.

CORNISH: Larry Merlo, one more thing. That coveted space behind the counter where the cigarettes currently are, what's going to go in that space?

MERLO: Well, we have been, you know, testing a number of different things and you'll be seeing some changes, you know, over the next few months as, you know, we begin to transition our stores with the October 1st date in mind.

CORNISH: That's Larry Merlo, president and CEO of CVS Caremart Corporation talking about his company's decision to stop selling cigarettes. Thanks so much for speaking with us.

MERLO: Thanks, Audie.

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