A review of the Government's drug buyer Pharmac will focus on the timeliness and transparency of its decisions.

Prime Minister Jacinda Ardern and Health Minister Andrew Little announced the independent review's terms of reference at Parliament today.

The Pharmac review will focus on two areas:

• how well Pharmac performs against its current objectives and whether this could be improved
• whether Pharmac's current objectives maximise its potential to improve health outcomes for all New Zealanders as part of the wider health system and whether these objectives should be changed.

It will also consider factors including:

• the timeliness of Pharmac's decision making
• the transparency and accessibility of its decision making
• equity - including access to medicines and devices for Māori and Pacific peoples.

The independent review panel will be chaired by the former Consumer chief executive Sue Chetwin and will include corporate governance consultant Frank McLaughlin, experienced health and governance expert Heather Simpson, pharmacist prescriber Leanne Te Karu, preventative and social medicine professor Sue Crengle and disability advocate Dr Tristram Ingham.

The review is intended to run until the end of the year with an interim report in August and a final report in December.

"I expect that the review committee will decide its own consultation process but that it will include at a minimum the appropriate input from consumers, Māori, Pacific peoples, clinicians and industry," Little said.

The budget for the review is expected to be between $1.5 and $2 million.

Ardern said the review would help New Zealanders have confidence in the system.

Ardern said broadly the Pharmac model worked well but they'd heard concerns about the model and the Government believed there was scope to improve it.

"Pharmac is a model that's critically important to the health sector and viewed as world leading - but let's make it better if we can."

Little said concerns raised about the drug-buying agency included access to new medicines, timeliness of decision making and its priorities.

"In addition there have been concerns about the safety of substituting medicines due to cost and availability, and access to products that are funded in other countries but not here in New Zealand."

Nearly 4 million New Zealanders received medicines procured by the drug agency.

The review was committed to by Ardern during an election debate with National leader Judith Collins who also promised to review the agency if elected.

Ardern said when asked if Labour would commit to a review, she said: "If it gives people faith in our system, then yes."

Newsroom reported this morning the review will investigate how the government drug-buying agency can better respond to specific government health priorities relating to emerging drugs and more.

In 2019 the Health Select Committee voted against a politician-led inquiry into the agency. The National Party said it appeared Labour only committed to the independent review when it was "politically palatable".

Little confirmed the Government was planning an independent inquiry into Pharmac and that Labour just didn't support it being led by politicians on the Health Select Committee.

Little said they wanted it to be independent and considered it "inappropriate" for MPs to do it.

"It needs to be at arm's length from politicians. It's not right for politicians making political judgments about Pharmac and its decisions.

"There are high-level policy decisions but it is better that they are reviewed at arm's length and independently," he said last year.

He said work is under way to establish terms of reference and an appropriate review body.