Yesterday's New York Times carried a story about CVS stores deciding to not carry tobacco products in a significant number of their stores and, in fact, charging a surcharge to customers who opted to stop in CVS stores which do continue to carry tobacco. This is because CVS is evolving from a drug store to a provider of health care (via it's nurse practioners, Doc-in-a-Box) stop in clinics for sore throats, blood pressure monitoring etc. CVS is now a big player in mail order pharmaceuticals, through which insurance plans reduce costs by contracting with a big player who can negotiate with pharmaceutical companies.
So this company, which had humble beginnings in Lowell, Mass and then acquired a group of drug stores in suburban Washington, DC, has continued to merge and grow and gobble up health related corporations and is now a conglomerate of health related companies. No doubt it will soon be offering health insurance.
The interesting thing is how it's corporate strategy, as a health care provider drove it to do something which could actually lose it money in the short run--refuse to sell tobacco products. But even that was a financial calculation. In the 1960's or even 1980's around 40% of Americans smoked; now it's down to 18%, so throwing aside a dwindling market in hopes of looking good to a bigger demographic makes dollar sense.
In "West Wing" something similar in a political calculus was portrayed: Josh, the President's assistant, lets loose a torrent of invective against some balky Congressmen who are refusing to vote out of committee funds for a lawsuit against tobacco companies. He gives a very Aaron Sorkin speech about all the kids who will start smoking and all the people who will die from smoking, trying to shame the Congressmen, some of whom are Democrats, into funding the Justice Department's suit. Some of them object, on principle: How can you sue the tobacco companies for trying to deceive the public about the dangers of smoking when you'd have to be deaf, dumb and blind not to know about the dangers and every package carries a warning from the Surgeon General?
It is curious watching this, knowing how that actually played out: The tobacco companies wound up having to fund lots of programs, had to pay for some of the healthcare problems attributed to smoking, so, in the end, the companies had to accept a share of the responsibility for making a product which injures people. Not that the companies were alone in the blame, but they were part of it and they had to pay a share. So Josh was wrong but he was also right, as judged by the outcomes.
Later, Josh realizes that politically, he made a mistake by getting the Congressmen to vote out the money--it wound up giving them cover for their upcoming elections. Some of the Republicans proved to be vulnerable because their constituencies had changed to an anti smoking sentiment and their resistance to suing the tobacco companies might have cost them the election as "nicotine pushers." In the end, Josh had saved Republicans in key swing states by making them do the "right" thing.
Which reminded me of that visit Fred Rice made to the Hampton Democrats where he defended lowering the tax on cigarettes in New Hampshire. "We'll make less per package, but people from Massachusetts will come across the border for cheaper cigarettes, so we'll wind up making a lot more. Fewer cents per package, but a lot more packages. Lower profit margin but way higher volume."
"So, what you are proposing," someone asked him. "Is to export lung cancer to Massachusetts?"
"Well," Fred Rice said with palms held upward. "Cigarettes are legal."
That made sense to Fred. If they are legal then profiting from taxing a legal product is nothing to be ashamed of.
"The thing is," his interlocutor persisted, "We tax some things to drive behavior, to reduce their use, to motivate people to avoid expensive, destructive habits."
"They are legal," Fred repeated.
And that is all that matters, where money is concerned, as far as Fred Rice could see.
Of course profiting from something legal may not be enough of a cover in politics.
The question is: is that still all that matters in commerce?