San Francisco tobacco ban survives court challenges

December 15, 2008

Walgreens and Phillip Morris both recently requested injunctions to stop enforcement of San Francisco?s ban on selling tobacco products in pharmacies.

The nation’s first-ever ban on tobacco sales in pharmacies has survived an initial round of court challenges. Walgreens and Phillip Morris both requested injunctions to stop enforcement of San Francisco’s ban on selling tobacco products in pharmacies.

Both challenges were rejected and tobacco products disappeared from city pharmacy shelves on October 1, 2008. “I’ve been getting phone calls from pharmacists all over the country who want to get tobacco off their shelves,” said Fred Mayer, president of Pharmacists Planning Services, Inc. and long-time Drug Topics editorial board member.

“Our advice has been to wait until these two challenges play out in court. Now that two judges in two separate cases have upheld the ban, we’re seeing action on all sides.” Walgreens filed for an injunction in San Francisco Superior Court. The nationwide drug chain claimed that the ban places pharmacies at an unfair competitive advantage.

Walgreens’ attorney Daniel Kolkey noted that grocery stores and other non-pharmacy retailers with pharmacy operations can continue to sell tobacco products. Kolkey also argued that the ban violates constitutional guarantees of equal protection. Superior Court Judge Peter Busch ruled that the ban is reasonably related to a rational purpose: San Francisco is trying to eliminate a harmful product, tobacco, from retailers in the business of promoting better health. The judge agreed with city arguments that pharmacies are primarily health care retailers. Prescription and other healthcare sales are relatively minor components for grocery stores and big-box retailers.

Walgreens’ 2006 annual report, cited in the case, reported that Rx sales accounted for about 65 percent of retail sales. The city noted that Rx sales account for 7.5 percent of sales at Safeway and 1.5 percent at Costco. Walgreens spokesman Michael Polzin said the company plans to appeal the ruling. The company revealed in court filings that tobacco products generate about 9 percent of retail sales. Phillip Morris attacked the ban in U.S. District Court.

The company argued that banning tobacco sales violates its freedom of speech by hampering communications with its customers. Judge Claudia Wilken rejected that argument. More hearings are scheduled for early 2009. Phillip Morris spokesman Jack Marshall said the company was still examining its legal options. Deputy city attorney Vince Chhabria, who is defending both cases, said he hopes Phillip Morris drops the case “so the city can stop wasting tax dollars defending this frivolous lawsuit.”

Mayer, who created The Great American Smokeout stop-smoking campaign in the 1970s, said interest in the San Francisco ban continues to run high. The California Medical Association passed policy calling on pharmacies to stop selling tobacco products and urged the American Medical Association to take similar action. The National Community Pharmacists Association also told pharmacies to kick the tobacco habit.

“While NCPA recognizes the need for these small-business pharmacy owners to make autonomous decisions regarding the stocking of tobacco products, as healthcare providers in their communities, we encourage them to consider offering healthier alternatives to their patients,” said Bruce Roberts, NCPA executive vice president and CEO in a statement.

That’s tough advice. In its lawsuit, Walgreens said the ban would cost it $9 million in annual revenue across its 52 San Francisco outlets. Most independent pharmacies in the city had stopped selling tobacco products long before the sales ban was proposed. Most owners said the ban made little or no difference in sales since they did not carry tobacco products. Michael Tubb, pharmacy manager at Mom’s Pharmacy, said he had seen a slight increase in customers asking about smoking cessation products.

“The publicity was helpful,” Tubb said. “More people are asking about smoking cessation because of the ban. And I feel more comfortable recommending something for smoking cessation. Having the city behind smoking cessation is a nice plus.” But stores that still sold tobacco took a financial hit. Sam Ching, owner of Reliable Pharmacy, one of largest compounding pharmacies in San Francisco, said he lost between $600 and $700 in weekly tobacco sales.

Before the ban went into effect, Nick Shoman, owner of Charlie’s Pharmacy, predicted that he would lay off at least one employee because of lost tobacco sales. Many pharmacies have replaced their tobacco displays with smoking cessation products, which carry a higher margin than tobacco products. But sales volume is far lower.

“Smoking cessation revenues aren’t even close to what we lost from cigarettes,” Ching said. A Drug Topics online survey conducted after San Francisco passed its tobacco sales ban found just 24 percent of respondents in favor of pharmacies selling tobacco products.