Simone Leibovitch, manager of the Morgentaler Clinic in Fredericton, said the lawyer handling the lawsuit has been instructed to discontinue it.
Morgentaler launched the suit in 2002. But it was stalled by procedural motions and an appeal, and when he died last May, the case was in limbo.
Leibovitch said Morgentaler had standing in the courts and while he had the financial means to fight the provincial government to repeal Regulation 84-20, the clinic does not.
"In order for the law case to continue, there would be somebody who would have to expend considerable amounts of money and come forward to take that role on," Leibovitch said in an interview.
"You have to have very deep pockets to fight the government of New Brunswick."
Under Regulation 84-20 in the province's Medical Services Payment Act, abortion isn't covered by medicare in New Brunswick unless two doctors certify in writing that it is medically necessary and that it be performed by a specialist in an approved hospital.
The regulation was introduced in 1984 and has been a source of controversy since. Pro-choice groups say it restricts a woman's right to seek an abortion in the province, and in 2005, the former federal Liberal government put pressure on New Brunswick to fund private abortion clinics, but it was rebuffed.
A spokeswoman for the New Brunswick government said Health Minister Hugh Flemming would not comment Tuesday. Flemming also declined comment last week when the Morgentaler Clinic in Fredericton announce it will close, saying he could not speak publicly on the matter as long as the case was before the courts.
The Morgentaler Clinic in Fredericton said it will close at the end of July after providing abortions for 20 years, estimating it lost about $100,000 over the last decade.
Leibovitch said she hopes that someone can take over the clinic to keep it running after July, and while there has been some interest, she fears that Regulation 84-20 remains an obstacle.
"To come in and take over the clinic as it is now with women having to pay for abortions is going to be a losing battle for anybody," she said.
Peter Ryan, the executive director of the New Brunswick Right to Life Association, said he believes the announcement that the lawsuit is being dropped is a ploy by the clinic to rally public support and funding for the case.
"I think that's good news as far as we're concerned, but I'm sure it's also strategic on their part, so that has to be considered as to what they are angling here," he said.
Liberal Opposition Leader Brian Gallant reiterated his call for a review of the province's regulation that governs abortion funding.
"My understanding from what I've heard and read is that the two-doctor rule is a barrier," Gallant said.
"There could be other barriers and that's why I've reached out to the government and said we would support them in a revision and a review to ensure we are providing the access that we are constitutionally obliged to do."