Pharmac is to fund a new drug for the most common form of lung cancer, which is expected to extend the lives of about 100 patients each year.
Gefitinib will be available as a first-line treatment against the most common form of lung cancer (non-squamous advanced non-small cell lung cancer) when a tumour can't be removed by surgery.
A test called epidermal growth factor receptor will be required first to determine which patients will benefit from the drug. Those who do will take a tablet at home, rather than having to go through standard chemotherapy.
Radio New Zealand's health correspondent says 2000 people a year are diagnosed with lung cancer throughout the country and 90% of those at the most advanced stage are dead within a year.
Pharmac medical director Peter Moodie says the drug will give people three to five months' extra life.
Dr Moodie says the drug will cost up to $1.6 million per year, but will save money overall as current chemotherapy treatment is more expensive.
The Cancer Society's medical director, Chris Atkinson, says the new drug will benefit patients.
"It's a big advance in the drug fight against the various cancers. The cancers are clever and cancers work out ways to get around some of those specific blocking targets.
"Sometimes muddy drugs are quite useful as well, and we don't quite know how to combine targeted therapies with standard chemotherapy."