Source: BusinessNZ
BusinessNZ calls for medicines funding reset after landmark economic analysis finds every dollar invested returns $1.93 to the economy and $1.15 to the Crown
New Zealand is leaving billions of dollars in economic growth on the table by underinvesting in medicines, according to new analysis released today by BusinessNZ.
The BERL report for BusinessNZ, The economic and fiscal effects of an increase in medicines funding, finds that lifting medicines funding to the OECD average would deliver returns that exceed the cost of investment, driven primarily by higher labour force participation, reduced absenteeism and presenteeism, and lower demand on other parts of the health system. That translates into an economic return of $1.93 for every additional dollar invested in medicines funding, and a fiscal return of $1.15 to the Crown.
The economic return builds quickly: BERL finds that benefits to GDP exceed costs within three years. The fiscal return to the Crown accumulates more gradually, with higher tax revenue and reduced pressure on other health services projected to fully offset the cost of the investment within around 20 years.
Alongside these quantified returns, the report notes that improved access to medicines would help New Zealanders live healthier lives for longer, reducing the burden of chronic illness and disability and enabling more people to participate fully in work and daily life.
BusinessNZ Chief Executive Katherine Rich said the findings challenge the traditional view of medicines spending as simply a health cost.
“This report shows medicines funding should be seen as an economic investment, not just a health expense.
“New Zealand has spent years debating the cost of medicines. The wider question is the cost of not funding them.
“Better access to medicines keeps people healthier, in work for longer, and more productive while they are there. It also reduces avoidable pressure on hospitals and other high-cost services. The economic dividend is substantial.”
New Zealand currently allocates just 4.9 percent of health spending to medicines, compared with an OECD average of 13.3 percent. Australia, our closest neighbour, allocates 12.2 percent – more than double New Zealand’s share, though still below the OECD average itself. BERL estimates an additional $2.7 billion in annual investment would be required to reach the OECD benchmark and capture the economic and fiscal gains.
The report also finds New Zealand is lagging significantly behind countries it often compares itself with on access to modern medicines. As of March 2026, 134 applications remained on Pharmac’s Options for Investment list, with an average wait of 6.5 years, while 83 percent were already standard care overseas. New Zealand funded just seven percent of new medicines between 2012 and 2021, compared with an OECD average of 29 percent.
Importantly, the report highlights a paradox in New Zealand’s health profile.
While New Zealanders live about as long as their OECD peers, they spend less of their lives in good health. New Zealand’s healthy life expectancy is below the OECD average, meaning New Zealanders experience more years living with illness, disability and chronic conditions during their working lives.
That gap matters economically.
BERL found improved access to medicines would increase workforce participation, reduce sickness-related absences and, most significantly, reduce “presenteeism” – where people come to work but are less productive because of ill health. These productivity gains form the largest share of the report’s estimated economic benefits.
“Too many New Zealanders are becoming sick earlier, managing chronic illness during their prime working years, or leaving the workforce sooner than they should. That comes at a significant personal and financial cost for individuals and families, limiting earning potential and financial security,” said Ms Rich.
“The encouraging finding from this report is that better access to medicines can help people stay healthier for longer, remain in work, and build stronger futures for themselves, their families and their communities.
“When people are healthier, businesses benefit from a stronger workforce, families enjoy greater financial security, and government revenues improve.”
BERL projects that increased medicines funding would generate a net economic benefit of $182 billion and improve the Government’s operating balance by $29 billion over the next 35 years. By 2062, the economy would be nearly $41 billion larger than under current settings.
The analysis also shows medicines investment can help address mounting pressure on public finances.
While higher medicines funding would increase pharmaceutical spending, it would reduce future demand growth elsewhere in the health system through fewer complications, fewer hospitalisations and better disease management. Excluding the additional medicines expenditure itself, other health spending is projected to be lower than it otherwise would have been.
BusinessNZ said the report arrives as policymakers grapple with how to lift productivity, improve living standards and manage growing healthcare costs from an ageing population.
“The evidence is clear: investing in medicines is not simply about improving health outcomes, although that matters enormously,” Ms Rich said.
“It is also about improving productivity, growing the economy, strengthening public finances and ensuring New Zealanders can remain healthy and economically active for longer.
“If we’re serious about economic growth, medicines funding needs to be part of the conversation.”
Good health was good for business, and good for the economy – which was why BusinessNZ commissioned the report, Ms Rich said.
“A healthier population means more people able to work, participate, care for their families and contribute to their communities. It means fewer days lost to illness and injury, greater productivity and more New Zealanders able to remain independent and economically active for longer.
“Health spending is therefore not simply a cost on the Government’s books. Done well, it is an investment in New Zealand’s people and in our productive capacity.”
The BusinessNZ Network including BusinessNZ, EMA, Business Central and Business South, represents and provides services to thousands of businesses, small and large, throughout New Zealand.
About the report
The report was independently authored by BERL on behalf of BusinessNZ. Financial sponsorship for the research was provided by AbbVie, GSK and Roche. The findings and conclusions are those of the report authors.
Key findings from BERL
- New Zealand spends 4.9% of health expenditure on medicines versus an OECD average of 13.3%; Australia allocates 12.2%.
- Matching the OECD average would require approximately $2.7 billion in additional annual investment.
- Every $1 invested returns $1.93 to the economy and $1.15 to the Crown.
- The economic return exceeds cost within three years; the fiscal return does so within approximately 20 years.
- Net economic benefit over 35 years: $182 billion.
- Net fiscal benefit over 35 years: $29 billion.
- Economy projected to be nearly $41 billion larger by 2062.
- New Zealand ranks lowest in the OECD for subsidising new medicines, funding 7% versus an OECD average of 29%.
- New Zealand’s healthy life expectancy is below the OECD average despite similar life expectancy.
Sources: BERL cost of medicines report