Walgreen Suit Over San Francisco Tobacco Ban Revived

Walgreen Co., the largest U.S. drugstore chain, can proceed with a lawsuit challenging San Francisco’s first-in-the-nation law banning sales of tobacco products in some pharmacies, a California appeals court ruled.

The ordinance, passed in 2008 on the premise that drugstore cigarette sales convey tacit approval of smoking, barred tobacco sales at drugstores. The law doesn’t apply to grocery and warehouse stores, including Safeway Inc. and Costco Wholesale Corp., that also have pharmacies.

Today’s ruling reversed a San Francisco judge’s decision to dismiss Walgreen’s case. A state appeals court in San Francisco said there’s no rational basis to believe that the message conveyed to consumers by tobacco sales at Walgreen is any different than that from sales at supermarkets or big-box stores.

“We’ve always felt that in order for us to compete on a level playing field, any regulation like that should apply to all pharmacies and retailers with pharmacies equally,” Michael Polzin, a Walgreen spokesman, said in a phone interview.

Walgreen, which claims the city’s law is anticompetitive, can challenge whether the rule violates equal protection rights under the law, the appeals court said in today’s ruling.

San Francisco City Attorney Dennis Herrera “will continue to defend efforts by city officials to protect public health,” Matt Dorsey, Herrera’s spokesman, said in an e-mail. “San Francisco has a legitimate and compelling policy rationale to restrict drugstores from selling cigarettes, which are by far our leading cause of preventable death.”

The law, the first such city ordinance in the country, went into effect in October 2008. Walgreen expected to lose about 9 percent of its non-pharmacy sales in San Francisco to competitors as a result of losing customers because of the rule, said Daniel Kolkey, a Walgreen’s attorney, said at the time.