Drug companies will be expected to produce evidence of 'the total cost to the NHS' of adopting new treatments under a proposed appraisal process for the National Institute for Clinical Excellence.

A discussion paper issued by the NHS Executive says sponsoring companies will have to break down a range of costs, including the 'health-related costs to government-funded personal social services' but also 'costs avoided as a result of therapy'.

Patients' groups, the Department of Health and NHS bodies, including the NHS Confederation, will also have a key role in providing evidence to NICE, according to Faster Access to Modern Treatment: how NICE appraisal will work.

An appraisal group, likely to be chaired by a 'a respected clinician', will study the evidence and issue advice directly to the NHS.

Once the new arrangements are 'mature' - in about three years' time - the discussion paper suggests that the whole process should take about four months, allowing NICE to issue advice as new therapies are launched.

Oxfordshire health authority's public health and health policy director, Dr Sian Griffiths, described the proposals as 'ambitious and realistic'.

'One of the issues we have to face is not just whether things work, but whether we can afford them,' she said. 'The real problem will be balancing the national guidelines against local priorities.'

But John Appleby, director of the King's Fund's health systems programme, said the paper presented a 'narrow NHS view' of what costs should be counted.

'A new treatment that means you can stay at home rather than go into hospital may look cheaper, but it may simply be shifting the cost to patients or carers,' he said.

Health secretary Frank Dobson laid the draft order establishing NICE before Parliament last week. In a foreword to the discussion paper, he says NICE will 'provide authoritative guidance on what treatments work best for patients'.

NICE chair Sir Michael Rawlins told HSJ that the emphasis was 'certainly priorities' but not rationing.

'I remember rationing. You used to get seven sweeties a week, whether you were a thin boy or a fat boy. The NHS has never been into rationing,' he said.

In addition to looking at new drug treatments, NICE will consider existing interventions as health technology assessments are completed by researchers.

There will also be a 'catch-up programme' to 'commission appraisals of selected existing interventions' and issue authoritative guidance on their use.

The discussion paper says the appraisal group will be set up as a sub- committee of NICE's executive board, with a dedicated secretariat to critically review evidence.

Sponsoring companies may be required to pay for further research. But interested organisations will be able to comment on draft advice before it is issued.

Consultation on the proposals closes on 19 March.

Faster Access to Modern Treatment: how NICE appraisal will work. NHS Executive, Quarry House, Quarry Hill, Leeds,

LS2 7UE. Free.