New Zealand is about to become one of the first countries in the world to publicly fund an HIV prevention drug.

The medicine, brand name Truvada, currently costs $33 per day, but it'll be available for under $5 for a three-month supply from March 1.

Pharmac said the funding decision had the potential to almost completely eliminate the risk of HIV infection.

NEW ZEALAND AIDS FOUNDATION PrEP is taken daily and builds up in the system, preventing an HIV infection from establishing.

When taken on a daily basis, the drug can give 99 per cent effective protection from the virus.

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The medicine is known as pre-exposure prophylaxis or PrEP as it is taken before exposure to the HIV virus.

KEVIN STENT/STUFF The New Zealand AIDS foundation said the introduction of the funding for the drug, along with regular condom use, would decrease HIV new infection rates drastically.

It will be publicly funded for HIV-negative people who are at high risk of contracting the virus, including men and transgender people who have sex with men, people with an HIV-positive partner, and those who are likely to have anal sex without a condom.

The pharmaceutical management agency estimates up to 4000 people will be eligible.

"Together with safe sex practise, early diagnosis and access to treatment, we expect that PrEP will significantly reduce HIV transmission rates in New Zealand," Pharmac chief executive Sarah Fitt said.

PrEP is publicly funded in Scotland through the National Health Service and in the Canadian province of Ontario.

It is also available through pilot projects in Wales and England.

The New Zealand AIDS foundation said Pharmac's decision was a giant leap toward for HIV prevention in New Zealand.

"Providing affordable access to PrEP for those who need it will make an enormous difference to those most at risk of HIV transmission," executive director Jason Myers said.

In 2016, 244 people were diagnosed with HIV – the highest rate of new diagnoses there has ever been in New Zealand.

The previous highest number of diagnoses was in 2015, when 224 people were diagnosed with the virus.

"Condoms have been the mainstay of our HIV prevention response for over 30 years and have played a major role in keeping HIV prevalence low by world standards," Myers said.

"For those who struggle with consistent condom use – which can be for a range of legitimate reasons – NZAF is delighted that there will now be publicly funded access to this effective, alternative way of staying safe from HIV for those who need it."

About 3500 people in New Zealand are now estimated to be living with HIV.

Gay and bisexual men remain the population group most at risk.