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By Ed Silverman
Associated Press
October 20, 2014

Last month, CVS Health {CVS +0.83%} purged its 7,700 pharmacies of tobacco products in a gambit to embrace a commitment to improving public health and generate goodwill. But the move comes with a price – an estimated $2 billion in annual sales will be sacrificed.

Now, the company is hoping to find a way to compensate for that bet. Its Caremark pharmacy benefits manager, which is one of the largest in the U.S., will soon require some customers to make an extra co-payment, in some cases up to $15, on any prescription that is filled at a pharmacy selling cigarettes and other tobacco products, according to sources.

As a result, CVS and other pharmacies that do not sell tobacco products, but do participate in a network managed by Caremark – typically, for health plans and employers – will have an extra incentive to attract or retain customers. Participating pharmacies, including some large chains, that do sell tobacco products will be at a disadvantage.

A CVS Health spokeswoman tells us that “numerous” Caremark clients have asked about developing a “tobacco-free” network of pharmacies. And so, CVS “is in the process of identifying pharmacies that do not sell tobacco products,” she writes us. She did not provide a specific start date.

In explaining the move, the spokeswoman cites a recent study by CVS Health suggesting that policies that eliminate the sale of tobacco products at retail pharmacies in San Francisco and Boston were associated with up to a 13.3 percent reduction in purchasers of tobacco products.

To what extent the program, which has not officially gotten under way, will goose CVS pharmacy revenues or reduce smoking rates is unclear. The CVS spokeswoman did not respond to a question about estimated revenue gains, but one expert says the program should be a boon to CVS.

The “CVS retail drugstore business will certainly benefit, because prescription volume will shift into CVS retail pharmacies from other drugstore chains,” says Adam Fein of Pembroke Consulting, who tracks pharmacy distribution matters.

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