I got into a nice little twitter discussion yesterday about nicotine gum. As we all know ecigs have been under attack for using certain flavors that some feel are appealing to children, even though you can get nicorette in fruit chill, cinnamon surge, and other enticing flavors for those underage (my favorite gum growing up was big red, my friends loved fruitstripe). This lead to further discussion about how a certain drug store chain that no longer sells cigarettes has said gum on display at the end of candy aisles and right up front with the check out candy. That company being of course CVS. I had a lot more I wanted to say, but twitter isn’t good for long points. I’ve been sitting on this topic for over a year. Rocco and I have glanced on it on a few podcasts, but for reasons always kept it short. No more.
Last year CVS made major waves in the industry when they decided to no longer sell cigarettes or any tobacco product for that matter. It was heralded by the media as an ethical move of great sacrifice of dollars to practice what they preach- helping people live longer healthier happier lives. They were putting people’s health over profits, something rare in the corporate world. Too bad it was all a lie.
CVS was a convenience store/pharmacy. I say was because in 2007 they merged with Caremark. What is Caremark? Only the country’s largest Physician Practice Management (PPM) and Prescription Benefit Management (PBM). In case you don’t know what a PBM is, here’s a quick rundown-
PBM’s are a Third Party Administrator (TPA) of prescription drug programs for a number of different insurance providers (think Kaiser, Blue Cross/Blue Shield, Aetna, etc.). Their purpose is to process and pay for prescription drug claims. There’s more though. They’re responsible for developing and maintaining formulary. They’re also responsible for making contracts with pharmacies. If you have or ever had a plan where you could only get your scripts from X drug store, this is why. Also on their long list of responsibilities- they negotiate discounts and rebates with drug manufacturers.
See the conflict of interest here? CVS provides the drugs on the retail side, while Caremark has it’s hand in the pricing, manufacturing, and determining where you can buy your drugs from. Big shocker people with Caremark as their PBM have to go to CVS for their medicine. It’s all the actions and practices of a drug cartel, only because it’s government sanctioned and deemed legal, it’s considered smart business practice by it’s share holders and CEO. I digress though.
In 2010 we saw the passing of the Affordable Care Act (ACA). The most ironically named health care plan in history. My wife’s insurance for example has gone from $200 to $240 to if she keeps her current plan $328 in the span of three years. It’s really a tax, one that you get penalized for if you don’t have insurance. In other words it put the government in bed with the insurance companies and with health care. For the other major PBM’s this wasn’t an issue at all. They had no conflict picking up those government endorsed contacts for prescriptions. CVS/Caremark (now CVS Health) that wasn’t the case at all…
Their selling of cigarettes and other tobacco products was a major roadblock at getting to all that sweet influx of capital. This is what fueled the decision to no longer carry them, not health. They loved throwing numbers at people, saying how they knew this move would cost them billions of dollars, as much as 3 billion to be exact. What they didn’t tell you is that number was gross, not the net sales of cigarettes. If people really knew how much was made off a $8 pack of cigs their head would spin. A majority of the cost of a cigarette for the consumer is tax dollars, both state and fed. There’s little profit to be made (which is why we’re seeing the attack on vaping, the government isn’t happy their income stream has been disturbed). The real loses for CVS was in the subsequent sales that went along with the pack of analogs- chips, candy bars, and soda. That loss is covered though as well. As of today CVS is projected to make over $13 billion from the ACA contracts and prescription sales. Even if that is gross sales figures, it’s still four times as much as they made off cigs and cigars. In other words they made more money off not selling them.
What about vaping though? That’s something you will never see sold in a CVS as long as they aren’t FDA approved. Until they won’t affect the said ACA contracts, they will be treated as a tobacco product. In fact they’ve made their anti-vaping stance loud and clear to their employees, letting them know if they are caught vaping on store grounds it’s a terminable offense. Their anti-nicotine in every way save for one- CVS has no issue selling FDA approved NRT items. They even go so far as to merchandise them on a power wing at the end of candy aisles in some stores, and having them displayed promptly on the front check out magazine racks in reach of anyone taller than 3 feet. Anything for a buck right?