Walgreens sues San Francisco over its ban on cigarette sales in pharmacies

October 13, 2008

Walgreens is taking the city of San Francisco to court to contest its ban on tobacco sales in pharmacies.

Key Points

Walgreens has asked California courts to block the city of San Francisco's new ban on tobacco sales in pharmacies. The request for an injunction was set to be heard in state Superior Court on Sept. 30, the day before the ban was scheduled to take effect.

Walgreens' complaint alleges the new ordinance is anticompetitive and violates the equal protection clauses of the United States and California constitutions.

Dr. Mitch Katz, director of the city Department of Public Health, disagreed with Walgreens' complaint.

"To say this is your right to sell the substance associated with the number one cause of preventable death in America today?" Katz told reporters. "It's unbelievable to me."

The San Francisco Board of Supervisors approved the ban in August. As of Oct. 1, pharmacies are prohibited from selling cigarettes or other tobacco products. Other retailers, including grocery stores and mass merchandisers with pharmacy operations, can continue tobacco sales.

The ordinance was introduced by city Mayor Gavin Newsom and is modeled on similar bans in eight Canadian provinces. The Board of Supervisors passed the legislation on two consecutive eight-to-three votes.

The ordinance affects 52 of 54 Walgreens stores in the city. Walgreens' other two stores do not have pharmacy operations and will be allowed to continue tobacco sales. Other chain pharmacies, including Rite-Aid and Longs Drugs (which CVS is attempting to acquire) will also have to eliminate their tobacco counters.

Competitors, including Safeway, Lucky Supermarkets, and Costco, are not affected. The ordinance specifically excludes grocery stores, mass merchandisers, and other retail operations where pharmacy is not the focus of operations.

Independent pharmacies are largely unaffected because most have already stopped selling tobacco products on their own. "Just about every independent pharmacy in San Francisco, 98 percent of them, stopped selling tobacco because it kills patients," said Fred Mayer, president of Pharmacy Planning Services, Inc. and a long-time member of the Drug Topics editorial board.

"The American Pharmacists Association has been saying for years that no pharmacy should be selling tobacco. Walgreens should be ashamed of themselves, putting corporate profits over the health interests of their patients."

The fiscal impact of the tobacco ban is unclear. Polzin said that tobacco sales are in the low single digits. But the chain is worried that tobacco buyers who now shop at Walgreens will change retailers and take their entire book of business, including prescriptions, with them.

Target stopped selling tobacco products in 1996, saying that new laws that restricted sales made them too labor-intensive to be profitable. The chain said the financial impact was minimal.

Wal-Mart stopped selling tobacco in its Canadian stores in 1994. The move followed legislative action in Ontario to prohibit retailers which operate pharmacies from selling tobacco. Wegmans Food Markets, a 71-store grocery-pharmacy chain based in Rochester, N.Y., halted tobacco sales in February.

"As a company, we respect a person's right to smoke, but we also understand the destructive role smoking plays in health," chief executive officer Danny Wegman said.

California-based Mollie Stone's grocery chain dropped tobacco in 2006. In November 2007, CVS chief executive officer Thomas Ryan said the chain was considering halting tobacco sales. "We have a vision in our company to strive to improve human life and it is a challenge around cigarettes," Ryan told the Reuters Health Summit in New York.

"It's a big number from a dollar standpoint," Ryan said. "It's a big number from an ancillary sales standpoint. But it's something we wrestle with. We've had internal battles and discussions. I wouldn't rule it out at some point down the road."

CVS and Wal-Mart are not affected by the San Francisco ban because neither has retail operations in the city. Both would be hit by a similar ban in Marin County, just north of San Francisco. The county Board of Supervisors is expected to pass its own pharmacy tobacco ban in October.