The health select committee has recommended sweeping changes to the way the National Institute for Health and Clinical Excellence assesses what drugs and treatments should be available on the NHS.

In a report published today the committee says the institute's cost threshold of£30,000 for each additional year of full health the treatment brings the patient is of "serious concern".

This way of calculating the cost-effectiveness of medicines is known as a quality adjusted life year. Patient groups and pharmaceutical companies told MPs the threshold figure was too low and had not increased since 1999. But the committee also heard it bore no relation to the size of the NHS budget.

Primary care trusts tended to set a limit of£20,000 per quality life year gained and so "struggled" to implement NICE guidance, the committee heard. A separate body, with representatives from NICE, government and PCTs should be introduced to determine the NICE threshold, the MPs say.

The committee also expresses disappointment that the institute had "ignored" its earlier recommendation to put more emphasis on re-examining old drugs and treatments with a view to encouraging disinvestment.

"It is not acceptable that NICE continues to ignore this recommendation," the MPs say.

Responding to concerns that the approval process takes too long, the committee has recommended that NICE introduces a fast-track assessment so that newly licensed drugs are subjected to less in-depth evaluation with a lower cost threshold. The threshold could then be increased following the more time-consuming full appraisal.

To assist NICE in this process the MPs say it should be given full access to the data from clinical trials collected by the Medicines and Healthcare products Regulatory Agency.

Although the committee is critical of the way the institute works at present, the MPs say it still has a "vital role" as demand for NHS services would always outstrip resources.