Pharmac Cuts Costs on Medicines to Fund New Treatments, Boosts Public Input

In a move designed to improve the accessibility and affordability of medicines in New Zealand, Associate Education Minister David Seymour has welcomed Pharmac’s latest annual tender decisions, which reduce the cost of funded pharmaceuticals while paving the way for new treatments to be made available.

Pharmac’s tender process, which allows medicine suppliers to bid for exclusive supply rights, is a cornerstone of New Zealand’s strategy to manage the national medicines budget effectively. This year’s changes are expected to free up between $30 million and $50 million, enabling the agency to fund innovative and potentially life-saving new drugs.

Smarter Spending on Off-Patent Medicines

Every year, Pharmac issues a competitive tender inviting suppliers to become the primary provider of medicines that are no longer under patent protection. Most patents on pharmaceuticals last around 20 years, after which generic manufacturers can legally enter the market and compete by offering significantly lower prices.

“Generic competition drives prices down, and that’s good news for our health system and the taxpayers who fund it,” said Minister Seymour. “By switching to generic alternatives where it is clinically appropriate, we can redirect those savings to fund medicines that patients currently don’t have access to.”

The changes are part of a broader effort to modernize the pharmaceutical funding model while balancing financial prudence with patient-centered care.

Learning from Past Mistakes: The Estradiol Patch Case

Minister Seymour acknowledged that previous decisions had not always met community expectations for engagement and transparency. A high-profile example was the switch to Estradiol TDP Mylan as the sole funded oestradiol patch in 2023. The transition drew sharp criticism from patients and advocacy groups, many of whom felt they had not been adequately consulted.

“Pharmac has clearly listened,” Seymour said. “The lack of meaningful consultation around the estradiol patch brand change was a turning point. It highlighted the need for greater community involvement in decisions that directly impact people’s lives.”

In response, Pharmac has added an additional consultation step to its annual tender process. This ensures that patients, carers, healthcare professionals, and advocacy groups have a formal platform to provide feedback before any final decisions are made about changing the brands of funded medications.

Embedding Consumer-Centric Practices

Pharmac’s improved approach to consultation comes amid broader reforms aimed at enhancing consumer engagement. Key recent developments include:

• Appointment of Natalie McMurtry as Pharmac’s new Chief Executive

• Creation of a Consumer Working Group to advise on public engagement

• Publication of the Pharmac Consumer Engagement Workshop Report

• Minister Seymour’s formal letters of expectations, reinforcing the importance of transparent, inclusive processes

“These are all positive steps towards building a health system that truly serves the people who rely on it,” Seymour added. “Patients and their families deserve a say in the decisions that affect their daily lives.”

Medicines Funded More Efficiently, Patients Heard

Pharmac’s updated tender process now better reflects a balance between fiscal responsibility and human-centered decision-making. While cost savings remain critical, especially in a constrained public health budget, the agency is increasingly recognising that one-size-fits-all solutions can leave patients behind.

By inviting public input, Pharmac is now ensuring that switches to new generic medications take into account not just clinical equivalence, but also the lived experience of patients—such as differences in patch adhesion, side effects, or ease of use.

“This is about saving lives and improving quality of life,” Seymour said. “Every dollar saved on one medicine is a dollar that can go toward treating someone waiting for access to another. But we have to do it in a way that’s respectful, inclusive, and fair.”

Looking Ahead

The Government remains committed to strengthening New Zealand’s pharmaceutical system through reform, innovation, and meaningful collaboration with the people it serves. The annual tender will continue to be a key financial tool, but its implementation will now be more transparent and patient-informed.

For more details on the annual tender and a list of medicines affected, visit Pharmac’s website.