Association executive officer Dr Gay Keating described possible legal action by Philip Morris against the Australian Government as intimidation and "a war of words".
"It's massive posturing in an intimidatory bully-boy way," she said.
Associate Health Minister Tariana Turia welcomed the Australian Government's decision to legislate for tobacco plain packaging.
It was her expectation New Zealand would inevitably follow Australia's lead on this.
However, Green Party co-leader Dr Russel Norman raised concerns at the possibility of New Zealand being sued too.
He said Philip Morris Asia Ltd said it was taking action under Australia's Bilateral Investment Treaty with Hong Kong.
"New Zealand also has an investment protocol with Hong Kong. Philip Morris can use it to stop our Government putting in place cigarette plain packaging, as recently recommended by the Maori Affairs Select Committee."
The issue was a timely reminder of the perverse rights granted to foreign companies in free trade and investment agreements, he said. He called for the Government to remove all investor rights protections in its review of New Zealand's free trade deal with Hong Kong so "we can regulate for good public health without the risk of Philip Morris suing us".
Mr Turia said Government officials had begun discussions with their Australian counterparts on aligning the two countries' policies on plain packaging and a report was expected to come back to Cabinet tomorrow.
The Australian laws on plain packs are expected to be introduced in January with all products required to comply within six months.
