The medicines watchdog, NICE, is to lose its power to turn down new medicines for use on the NHS.
It will give advice on which drugs are effective, but will not decide whether patients should be given treatments their doctor recommends, the Department of Health has confirmed.
Instead, groups of GPs will decide whether a drug should be funded or not.
Ministers hope to make new drugs affordable to the NHS by negotiating with pharmaceutical companies on price.
The plans, called value-based pricing, are set to come into effect in 2014. They are subject to consultation.
A Department of Health spokesperson said: “We will introduce a new system of value-based pricing which will make effective treatments affordable to the NHS.
“Our plans will ensure licensed and effective drugs are available to NHS clinicians and patients.
Many patients consider this development a victory. The thousands of patients who are denied life-extending drugs every year, despite their clinicians believing that they could help them, are ecstatic about the decision.
Many critics have blamed the ‘penny-pinching’ institute for the UK’s shocking record for cancer survival. Many patients have been denied innovative new drugs, which are freely available in other European countries, because they are not ‘cost effective’.
Cancer charities estimate that 20,000 patients a year die early because of NICE decisions. The NHS institute has also engaged in prominent disputes over denying Macugen and Lucentis, drugs to treat blindness, and three other drugs for dementia sufferers.
Following this new ruling, NICE will no longer arbitrate the availability of drugs. This will fall upon GPs instead. The value-based pricing regime, set to be introduced in 2014, will see Government officials negotiate with pharmaceutical companies to agree upon a price based on factors such as effectiveness and how much burden it reduces on carers.
There are concerns that this new system to lead to a postcode lottery, whereby patients in some areas are refused drugs that are available elsewhere.
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