New Zealand’s medicines budget to boost R&D-based drugmakers

But Fitch Solutions’ report noted that allocation for medicine investment remains low.

The expansion of the national medicines budget in New Zealand is expected to provide a boost for research and development (R&D)-based drugmakers, but public funding of modern medicines remains an area of concern, according to Fitch solutions.

New Zealand released the government’s budget for the 2022 fiscal year from July 2022 to June 2023. The so-called ‘Wellbeing Budget’ included $119.6m (NZD191m) of new investment for medicines over the next two years.

In a report, Fitch said this will be a positive development for drugmakers operating in the country, but New Zealand patient access to 'first-in-class' medicines lags behind the majority of its Organisation for Economic Co-operation and Development (OECD) peers.

The funding boost will be allocated to the Pharmaceutical Management Agency (PHARMAC), which is responsible for deciding which medicines are funded in New Zealand. With this, PHARMAC is now talking with pharmaceutical suppliers about possible agreements for treatments on its options for investment list.

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Fitch believed that this shows the government’s commitment to improving New Zealand’s access to medicines.

“The increased allocation will provide favourable conditions to market new patented medicines in a country that has historically presented challenges for multinational drugmakers,” Fitch said.

Despite higher allocation, funding of modern medicines in most therapy areas will remain an area of concern, with the report noting that the level of medicines investment is only 5% of the total health portfolio based on the 2022 budget.

This is expected to keep New Zealand at the bottom of the OECD rankings compared to peer nations such as Australia and the UK where the investment level is over 10%.

“New Zealand’s extensive backlog of medicines with some drugs on the waiting lists waiting to be publicly funded due to funding shortfalls also reinforces the issues with the medicines procurement system,” Fitch said.

Fitch expects combined sales of prescription drugs and over-the-counter medicines to post a 5-year compound annual growth rate of 4.6%, higher than the previous projection of 2.5%.

“The new forecast follows a re-evaluation of the fundamentals of the pharmaceutical market, along with consideration of the latest budget release. Despite this upgrade, New Zealand remains a challenging market for R&D-based drugmakers,” the report added.