Writer: Andrew Gaudin, Chief Executive, Pharmacy Guild of New Zealand
We recognise Health New Zealand’s final cost pressure uplift offer of three percent is inadequate and fails to consider the reasonable cost pressures faced by community pharmacy, which is a key national annual agreement review (NAAR) obligation.
Our analysis, jointly worked on with the tax and accounting firm Moore Markhams, demonstrated the average cost pressure growth faced by community pharmacy was around 5.3 percent per annum over the last three years.
This aligns closely with Health New Zealand’s independent economic-based estimate of reasonable cost pressures of 5.62 percent for our financial year 2024 to 2025.
Community pharmacy fees growth over the last 17 years has been 20 percent below the consumer price index (CPI), while other parts of our health system have been funded at around CPI for general practice, or well over CPI for hospital staff.
Our advocacy work over the last three months has resulted in a significant program of work to better position community pharmacy for the future.
Because of the inadequate cost pressure uplift offer — which is an increase in funding or price provided to a business or organisation to cover rising operational costs — it is imperative the forecast adverse 12-month prescription policy funding impacts are fully mitigated, and the development and implementation of a sustainable funding model is delivered in 2026/27.
Twelve-month prescription impacts
We have consistently and repeatedly advised since October 2024, the 12-month prescription policy should not have any adverse fee and funding impact on community pharmacy.
Community pharmacy will still have to do the same amount of work as it has always done — same medicine, same dosage, same frequency of dispensing — for those existing patients who are stable on a long-term medicine regime.
Ironically, community pharmacies will likely end up needing to provide increased service levels of clinical oversight because of this new policy due to less GP oversight — and should not be punished for this.
We have consistently and repeatedly advised since October 2024 that the 12-month prescription policy should not have any adverse fee and funding impact on community pharmacy.
Community pharmacy should not be expected to take on the risk of unintended, unjustifiable, and unacceptable fee and funding impacts.
Without mitigation:
- There will be an unjustified and unacceptable annual fees reduction for community pharmacy of between 26.7 percent and 28.4 percent for dispensed items under the 12-month prescription policy, relative to the current three-month prescription policy.
- The three percent cost pressures uplift offer in 2025/26 will be wiped out, as the annual adverse funding impact of the 12-month prescription policy equates to an average 3.5 percent price reduction across all ICPSA activity in 2025/26.
Both impacts including fees and funding should be fully mitigated in 2025/26 and beyond.
Put simply, the current community pharmacy funding model has been developed around a three-month prescription duration, and this is not fit or appropriate for use for a12-month prescription duration.
We are pleased Health New Zealand has agreed to an urgent review of the financial impact 12-month scripts will have, and to developing options to mitigate the adverse impacts.
Behind the scenes
Given the issues facing the sector, particularly the inadequate cost pressures uplift offer and potential financial impacts of 12-month prescriptions, we knew how important it was to progress these issues at pace on behalf of members.
We also recognised what can be achieved within NAAR is limited and saw the value in working outside of NAAR and higher within
the system.
This work involved PGNZ holding regular meetings with the Health Assurance Unit — which is set up to provide advice to the Minister of Health, the Hon Simeon Brown, as well as the Crown Observer and senior leaders on Health New Zealand.
Our advocacy work over the last three months has resulted in a significant program of work to better position community
pharmacy for the future — work which has been acknowledged by Minister Brown.
We are pleased Health New Zealand has agreed to an urgent review of the financial impact 12-month scripts will have, and to developing options to mitigate the adverse impacts.
While three percent does not adequately recognise the cost pressures faced by community pharmacy, and we continue to highlight this, it’s important to ensure we achieve as much as we possibly can for members each year.
Key successes delivered by PGNZ include:
- Additional NZD2.8m in cost pressure funding secured, due to our repeated questioning of the Integrated Community Pharmacy Services Agreement expenditure baseline used by Health New Zealand
- NZD5m annual fund for nationally consistent pharmacy services
- Ensuring the NZD5m fund can be used for staff training costs and investment in technology to expand services
- Commitment to develop and implement a sustainable funding model in 2026/27
- Urgent review to mitigate financial impacts of 12-month prescriptions by October
- Nationwide contracting policy with conditions for awarding new Integrated Community Pharmacy Services Agreements.
These are the right commitments to take the sector forward, and we will work to ensure they are delivered. This is not the end of the road – but it’s progress – and we will keep pushing for the support our sector urgently needs.
Please note, this article was developed in September 2025, while NAAR discussions remained ongoing.
