Pharmac has frozen plans to fund a lung cancer drug that would have helped at least 1400 patients a year, saying it can no longer afford to make the investment.
The move has dashed hopes that Keytruda would soon be publicly funded for lung cancer - New Zealand's biggest cancer killer.
RNZ has obtained documents showing Pharmac had planned to offer a Request for Proposals, or RFP, where drug companies are asked to pitch their products and prices, but has put that on hold due to budget constraints.
Chief executive Sarah Fitt told RNZ that Pharmac was concerned about rising drug prices worldwide in the COVID-19 pandemic and that it could not commit to funding the drug now - but still hoped to in the future.
Lung cancer patients and their advocates are devastated and said they had been given false hope.
Keytruda is available in New Zealand but patients must fund it themselves.
For Michele James, 57, and her partner Clive, that had meant selling their Wanaka home.
"That was the biggest kick in the guts. We had worked hard all our lives and got to build our own house," she said.
Her partner Clive estimated they had spent $110,000 on the drug.
"We are the lucky ones, because Keytruda for Michelle has worked, and is still working, and the reality is that money and houses - they're just sticks and stones - Michelle is still alive."
Lung cancer kills about 1800 people a year in New Zealand - more than breast cancer, prostate cancer and melanoma combined - but patients and their advocates had hoped help was on its way.
Lung Foundation chief executive Philip Hope said Pharmac wrote to the organisation in September last year saying they were preparing an RFP for drug companies to pitch prices and products to fund the drug.
This week he got a letter from Fitt saying things had changed - Pharmac no longer had the money and the RFP was going on hold.
"So what we now have is 30 lung cancer patients continuing to die prematurely every week and you have to ask yourself, is that acceptable?"
Fitt said funding a drug like Keytruda for lung cancer would have cost hundreds of millions over the next five years and Pharmac could not commit to that given the COVID-19 outbreak.
"There's been quite significant impacts on manufacturing and supply chains and we are already seeing significant price increases," she said.
"With the airline situation, freight is becoming a huge issue. So it's actually getting stuff into the country which is proving challenging but also the costs associated with it."
There was now uncertainty over the Pharmac budget because medicine costs were rising due to supply issues in the pandemic, she said.
"There are obviously products that are being used in much bigger quantities overseas, particularly say in intensive care. So the availability of those products reduces and the price goes up."
Pharmac had growing concerns about maintaining the supply of medicines into New Zealand.
"We're worried about the impact with the air freight," Fitt said. "I think we're starting to see that impact on the aviation industry, globally and that's going to have an impact on medicines that we fly into the country from overseas."
The backdown has come despite the funding plan for Keytruda, or an equivalent drug, being well advanced.
It was part of Pharmac's annual procurement plan, publicly available on its website.
Pharmac's expert subcommittee on cancer treatments recommended last April that Keytruda, the brand name for pembrolizumab, be funded as a high priority.
The committee said that "both health-related quality of life and overall survival results reported for pembrolizumab were clinically meaningful" for affected patients with lung cancer.
Patient Voice Aotearoa spokesperson Malcolm Mulholland said it was rare for Pharmac to engage in an RFP and then pull the plug.
"They have very much given false hope to lung cancer patients, especially when you look at the numbers involved," he said. "There are some 1400 patients that could potentially have their lives extended for five years or more by the funding of this drug."
Michele James' partner Clive was angry with Pharmac and believed the agency should be pushing harder for more funding.
"I have never once heard her stand up in front of the government and say, we need this more money because we want to fund these immunotherapy drugs," he said. "And yet all of a sudden the government can find billions of dollars to help with COVID-19."
James said Keytruda was working well for her and that the alternatives were unbearable.
"Having chemo, I would have lost my hair, I would have lost weight. They only gave me seven to 12 months. I would have been dead by now."