Drug-buying agency Pharmac will stop fully funding the gastric medicine Losec from next May, opting instead for a generic version.
About 600,000 people use Losec to treat stomach and gastric problems.
The medicine, produced in Sweden by AstraZenica, has been available in New Zealand since the early 1990s and has been used to treat about 600,000 people.
Pharmac medical director Peter Moodie said a generic version produced in India, called Dr Reddy's, has passed all Medsafe tests and will save $29 million over two years.
Dr Moodie said the patent has expired on Losec - AstraZeneca's brand for omeprazole - and the medicine is being made by a number of generic companies which compete on the basis of price.
AstraZeneca spokesperson Stephen Johnston said the company fears many people who are accustomed to Losec may suffer side-effects if they change to a generic version.
"Since the generic has come into the market we have had doctors and patients ringing us with problems that are consistent with other brand switches."
Pharmac maintains there will be few if any side-effects to a switch from Losec to Dr Reddy's.