• San Francisco Bans Tobacco Sales in Drug Stores
  • November 2, 2008
  • Law Firm: Manatt, Phelps & Phillips, LLP - Los Angeles Office
  • A San Francisco law banning tobacco sales in drug stores went into effect on October 1 after surviving efforts by Walgreens and Philip Morris to prevent it from taking effect.

    Walgreens, a major pharmacy chain, sued in California state court to temporarily block the ban, contending that its stores would lose millions of dollars while its lawsuit seeking a permanent injunction was pending. Walgreens operates 52 stores in San Francisco and says it will lose $9 million a year under the tobacco ban.

    The court rejected Walgreens’ motion, finding the retailer had "some very difficult hurdles to get over" because courts are required to give deference to legislative decisions as long as the laws are "reasonably related to a rational purpose."

    San Francisco argued that the law is warranted because as a "health-promoting business," Walgreens’ sale of tobacco products sends an implicit message that smoking is not harmful to your health.

    Only pharmacies are subject to the ban. Walgreens contends that this distinction is unconstitutionally discriminatory, since the big-box and grocery store chains exempted from the law also have pharmacies that sell prescription drugs.

    But the court appeared to be swayed by research showing that Walgreens derives a significantly higher percentage of its revenue from prescription drug sales than either Safeway or Costco, both of which are exempt. According to the city, in 2007, Walgreens reported that about 65 percent of its revenue came from prescription drugs, versus 7.5 percent for Safeway and 1.5 percent for Costco. The city says this gap provides a “rational basis” for limiting the tobacco ban to drug stores.

    The law was signed by Mayor Gavin Newsom on August 7. A month later, on September 8, Walgreens sued on the grounds that the law violates the equal protection guarantees of the 14th Amendment.

    According to Deputy City Attorney Vince Chhabria, San Francisco is the first city to implement such an ordinance.

    Walgreens has said it will appeal. Tobacco giant Philip Morris also lost a bid to prevent the law from taking effect.