New Zealand’s supply of generic medicines is vulnerable to disruption as a result of shipping restrictions through the Strait of Hormuz, according to a new report.

The report from BMI, a unit of international ratings agency Fitch, analyses the outlook for New Zealand’s pharmaceutical sector. On supply factors and risks it says: “Ongoing geopolitical tensions between the US and Iran will likely disrupt New Zealand’s pharmaceutical imports.”

New Zealand relies on international markets for a majority of its medicines, with India producing about 60 percent of its supply. An extended conflict in the Middle East, which India relies on as a transport route, would likely increase freight costs and slow shipments.

BMI pharmaceuticals & healthcare analyst Sakshi Sikka, who wrote the report, says the inputs at risk are raw pharmaceutical ingredients. 

“Cost pressures could also intensify given New Zealand’s reliance on pharmaceuticals from India, which depends on the Strait of Hormuz for petroleum-based inputs used in drug manufacturing,” her report says.

“For now, supply conditions remain stable and to mitigate near-term risks New Zealand’s drug buying agency, Pharmaceutical Management Agency (Pharmac) is working closely with the health ministry, suppliers, wholesalers and distributors to identify any emerging risks early and ensure consistency of supply of medicines to New Zealand.”

Associate Health Minister David Seymour says it’s business as usual for Pharmac: “At any given time, there will be around 100 medicine and medical device supplies that are at risk of disruption, and Pharmac has to hustle to keep supplies going.

“Pharmac generally does a very good job of this, so Kiwis often have no idea there’s a problem. Since the conflict began on February 28, the challenge of maintains supply has not been significantly more difficult than business as usual, but of course we are keeping a watchful eye, and Pharmac is regularly reporting to the Ministerial oversight group on the Middle East.”

Government agency Pharmac received a $54 million budget uplift over the next four years in the coalition Government’s Budget. 

Pharmac’s chief advisor of pharmaceuticals Adrienne Martin says this funding will help support the agency to manage global disruptions to supply chains and costs, so patients can continue to access medicines they rely on.

“Where funding allows, it may also support access to new medicines or widen access to existing funded medicines.”

However in a briefing about the ways in which this funding “falls short”, the Public Health Communication Centre pointed out that the $13.5m per annum is less than 1 percent of their $1.76 billion 2025/26 budget.

BMI’s report also notes: “While recent government healthcare funding … may support access to medicines, it does little to address structural constraints in domestic manufacturing capacity.”

The report also flags a widening pharmaceutical trade deficit, meaning we are increasingly reliant on imports. Medicines NZ chief executive Graeme Jarvis says this shows we would benefit from greater Government investment in local pharmaceutical production.

“I think the fact that we invest a third less than the rest of the OECD probably is an indication that we need to pull our socks up a little bit more and get the mix slightly better than we currently have, in terms of our health investments overall,” Jarvis says.

“For now everything is moving along smoothly … New Zealand is getting the supply of medicine that it needs as a country, but the longer the war goes on, the bigger the issues are going to be. 

“Logistics costs will go up, because the fuel issue will become an issue for air freight as well and you’ve seen that already with airlines putting up their flight costs.” 

Jarvis says the only solution is working proactively with medicine suppliers to ensure continuous supply – whether it be generic painkillers or innovative cancer products.

Alongside its trade partner India, New Zealand imports 15.3 percent of its pharmaceuticals from Australia, another 15.3 percent from the US and 11.4 percent from Germany. 

Trade data from UN Comtrade shows pharmaceutical imports grew 7 percent year-on-year to $2.2b in 2025. This exceeds BMI’s initial forecasts of 6.2 percent.

“The upward revision to imports reflects strong underlying demand, driven by an ageing population, a rising chronic disease burden and the continued uptake of high-value innovative therapies,” the report says.

Meanwhile, pharmaceutical exports grew 2.1 percent to $616m, slightly below forecasting.

The trade deficit widened to $1.6b over the year. 

“By 2030, we forecast pharmaceutical imports to total $3.3b (US$2.1b) and pharmaceutical exports to reach $700m (US$455m) yielding a trade deficit of $2.6b (US$1.7b).”

The report notes that domestic manufacturing capacity is limited, which constrains local production of innovative pharmaceuticals 

Sikka says the main factor behind this is New Zealand’s relatively low level of outlay into the area. Our 1.5 percent of GDP is lower than Australia’s for example, which is 1.7 percent.

“This weaker investment base constrains the growth of a broader pharmaceutical and biotech manufacturing ecosystem, particularly for large-scale commercial production. 

“As a result, New Zealand has found it more difficult to translate clinical trial activity into commercial manufacturing and remains reliant on imported innovative medicines rather than domestically produced patented products.”