Pharmac estimates up to 4,000 people with a high risk of contracting HIV will be eligible for a drug to prevent infection with the virus which the Government's drug buying agency will now fund.
From March, Truvada will be funded for the prevention of HIV infection, a treatment known as pre-exposure prophylaxis, or PrEP, which has the potential to almost completely eliminate the risk of HIV infection.
Truvada is already funded for treating people infected with HIV, and it will now also be funded for people if they are not infected but are at a high risk of contracting HIV.
New Zealand will be one of the first countries in the world to publicly fund PrEP for the prevention of HIV.
"Together with safe sex practise, early diagnosis and access to treatment, we expect that PrEP will significantly reduce HIV transmission rates in New Zealand," said Pharmac chief executive Sarah Fitt.
Truvada was registered for PrEP in August 2017, and Pharmac has worked closely with the New Zealand AIDS Foundation to support them in preparing a funding application for PrEP, which was reviewed by Pharmac's clinical advisers and given a high priority for funding in November 2017, Ms Fitt said.
"Condoms continue to be the primary and recommended method of preventing transmission of HIV and other sexually transmitted infections. Condoms are fully funded on prescription and are highly effective, but rates of HIV infection are still increasing in New Zealand," she said.
Funded access to PrEP will require that people undergo regular testing for HIV and other sexually transmitted infections, and are monitored for risk of side effects.
People taking funded PrEP will receive advice on ways to reduce the risk of HIV and sexually transmitted infections.
The New Zealand AIDS Foundation says it applauds Pharmac's decision.
Prior to this "game changing development", PrEP was only available at a cost of around $1,000 for 30 Truvada pills. the foundation said.
As an economical alternative, many users have been forced to import generic versions of the drug from overseas pharmacies at a personal cost of around $50 per month, it said.
"Providing affordable access to PrEP for those who need it will make an enormous difference to those most at risk of HIV transmission in New Zealand," said Dr Jason Myers, executive director of the New Zealand AIDS Foundation.
"It's a giant leap forward for our ambitious goal of ending new HIV transmissions in New Zealand by 2025," he said.