When CVS Caremark Corp. Chief Executive and President Larry Merlo announced that his drugstore chain would stop selling tobacco products , one of the first to respond was the president of the United States.
The speed of the president’s statement indicates that CVS’s decision was likely coordinated with the White House. Every day, countless business decisions are made without any comment from the White House. Something unusual was going on.
This is troubling. It gives the appearance of preference for those who curry favor with the powerful, and it squeezes out smaller entrants who can supply innovative products and services to consumers. What do you think about CVS’s decision? Take our poll.
The president said: “I applaud this morning’s news that CVS Caremark has decided to stop selling cigarettes and other tobacco products in its stores, and begin a national campaign to help millions of Americans quit smoking instead.”
The president congratulated Merlo by name, as well as “all who helped make a choice that will have a profoundly positive impact on the health of our country.”
As long as businesses are acting within the law, they should not be trying to please the federal government. Nor should they refrain from acting because they expect government’s praise. There is no upside to such behavior, and much downside.
As everyone knows by now, CVS, the No. 2 drug store chain, will give up $2 billion in revenues by halting sales of tobacco products. CVS’s stock declined in response to the announcement, but it is not clear that shareholders’ long-term interests will be undermined.
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The management of CVS might not be able to tell shareholders about the pressures the chain may face to win favor with the government, especially in the context of the newly implemented Affordable Care Act. Of course, health groups have been trying for years to limit tobacco sales and advertising.