New Two-Agency Model Set to Transform Medical Device Procurement in NZ

The Government has announced a major shift in how New Zealand procures medical devices, introducing a two-agency model that will divide responsibility between Health New Zealand (HNZ) and Pharmac, while also fostering collaboration between the two. Associate Health Minister David Seymour and Health Minister Simeon Brown confirmed Cabinet’s approval of the framework, which they say will bring greater efficiency, certainty, and transparency to a system long plagued by indecision.

Ending Over a Decade of Uncertainty

For more than 13 years, the question of which agency should oversee the procurement of medical devices has remained unresolved. In 2012, it was recommended that Pharmac take charge of procurement, but the transition never took place. Later, following the establishment of Health New Zealand through the merger of District Health Boards, proposals surfaced for HNZ to assume procurement duties—recommendations that were ultimately rejected.

This back-and-forth left the medical device sector frustrated and uncertain. Minister Seymour said the new decision marks a turning point:

“Device procurement has been paralysed for at least 13 years… Finally, everybody involved has clarity.”

A Split in Responsibilities

Under the new system, the responsibilities are clearly defined:

• Pharmac will focus on therapeutic devices that directly impact patient treatment and require significant clinical input, such as surgical implants and anaesthetic machines.

• Health New Zealand will lead procurement for infrastructure-related devices, including hospital beds, diagnostic tools, and imaging equipment, which require greater integration with healthcare facilities and models of care.

This clear division, Seymour noted, will allow device manufacturers to confidently plan investments in innovation, knowing exactly which agency oversees their product categories.

Encouraging Innovation and Transparency

Both ministers stressed that the reform will not only streamline processes but also reward innovation. Agencies will provide greater transparency about procurement priorities, allowing manufacturers to align new technologies with demand. This means better outcomes for patients, stronger industry investment, and improved productivity across the health sector.

Seymour emphasized that while inefficiencies may have gone unnoticed by the public, patients will feel the benefits moving forward:

“Patients may not have felt the problem, because inefficiency was the status quo. They will feel the difference.”

Building Value and Smarter Procurement

Health Minister Simeon Brown highlighted the scale of medical device procurement, with Health New Zealand spending nearly $1.5 billion annually. This includes everyday items such as cotton swabs and bandages, through to highly advanced equipment like MRI scanners.

He underlined the importance of ensuring every dollar delivers value:

“We need to make sure that every dollar is delivering good value for patients.”

To illustrate, Brown pointed to a recent procurement initiative addressing risks in glove supply and pricing, where HNZ implemented short-term tenders, securing reliability and saving more than $3 million.

Collaboration Between Agencies

Although their responsibilities are divided, HNZ and Pharmac will continue to collaborate. For instance, HNZ may leverage Pharmac’s independent evaluation expertise when procuring high-cost diagnostic machines like MRI scanners. In turn, Pharmac’s Health Technology Assessments can strengthen HNZ’s decision-making by ensuring devices are evidence-based and cost-effective.

This model combines the bulk-purchasing and contract management strengths of HNZ with Pharmac’s expertise in rigorous health assessments, resulting in what Brown describes as “smart, patient-focused care.”

A Stronger Future for Health Services

The Government believes the reforms will ultimately enhance New Zealand’s health system, ensuring patients receive the medical devices they need, when and where they need them. By providing certainty to clinicians, manufacturers, and suppliers, the changes are expected to create a more responsive and innovative procurement environment.

“This is about building a health system that delivers for all New Zealanders,” Brown concluded, underscoring that the reform is not only about cost savings, but about ensuring access to the best tools and technologies to support better health outcomes.