The U.S. Centers for Disease Control and Prevention (CDC) cites tobacco use as the nation’s leading cause of preventable disease and death, noting that nearly all tobacco use begins during youth and young adulthood. On Friday, the Food and Drug Administration (FDA) requested an order to ban sales of tobacco products at a Walgreens Boots Alliance Inc. (NASDAQ: WBA) store in Miami. The FDA also sought a similar ban on a Circle K store in Charleston, South Carolina.
The FDA action against the Walgreens store cites five repeated violations beginning in December 2015, with the last coming in October 2018. The FDA sent two warning letters and initiated two civil money penalty cases against the store before filing the complaint.
In the announcement of the filing, the FDA noted that “Walgreens is currently the top violator among pharmacies that sell tobacco products, with 22 percent of the stores inspected having illegally sold tobacco products to minors.” As of last August, Walgreens reported that it operates 9,560 stores in the United States, including Puerto Rico and the U.S. Virgin Islands.
FDA Commissioner Scott Gottlieb, M.D., said:
I will be writing the corporate management of Walgreens and requesting a meeting with them to discuss whether there is a corporate-wide issue related to their stores’ non-compliance and put them on notice that the FDA is considering additional enforcement avenues to address their record of violative tobacco sales to youth. … I’m also deeply disturbed that a single pharmacy chain racked up almost 1,800 violations for selling tobacco products to minors across the country. I have particular concerns about whether the pharmacy setting is influencing consumer and retailer perceptions around tobacco products in a way that’s contributing to these troubling findings.
CVS Health Corp. (NYSE: CVS) is the only pharmacy chain that has so far eliminated the sale of tobacco products from its stores. CVS stopped sales in October 2014 and said at the time that annual revenue would take a hit of about $2 billion.
The FDA includes e-cigarettes among its tobacco products, although none of the citations for the Walgreens store cites e-cigarettes or their flavors as the product sold illegally to a minor. More than 11% (1.73 million) of U.S. high school students claimed e-cigarette use 2017 of a total of 19.6% (2.95 million) who said they used any tobacco product. Some 7.6% said they smoked cigarettes and 5.5% used smokeless tobacco.
Ironically, Walgreens claims that more than 400 of its stores also include a health care center. When CVS announced that it was ending sales of tobacco products the company cited an article from the Journal of the American Medical Association: “These retail clinics, originally designed to address common acute infections, are gearing up to work with primary care clinicians to assist in treating hypertension, hyperlipidemia and diabetes – all conditions exacerbated by smoking.”
Walgreens stock traded down about 1.2% Friday morning, at $70.30 in a 52-week range of $59.07 to $86.31. The stock’s 12-month consensus price target is $76.26.