NICE said it would create a guide to developing local formularies for PCTs and hospitals, to ensure that all NICE-recommended drugs are available across the country.
A recent DH report into innovation in the NHS said that local formularies often excluded certain technology appraisals or challenged their conclusions, creating a barrier to use of clinically and cost-effective drugs.
The report advised that all NICE technology appraisals and their recommendations should be automatically used in PCT and hospital formularies.
GP recently revealed how GPs are being barred from prescribing drugs recommended by NICE because PCTs have 'blacklisted' the treatments to cut costs.
Dr Gillian Leng, deputy chief executive of NICE said: 'NICE will embark on a specific piece of work to look at how local formularies are put together. At the moment there is no standard process for them and there tends to be a lot of variation and inconsistencies across England.'
She added: 'NICE-approved drugs should not be excluded from local formularies on the grounds of cost. We want all patients to have access to medicines that we consider to be effective.'
NICE will hold a workshop to develop the guide and then a consultation before being published later this year.
The DH also plans to introduce a NICE Compliance Regime by May to ensure NICE-approved drugs are quickly and widely available across the NHS.
To support uptake of NICE advice, the department will also create a project called the NICE Implementation Collaborative.
This will bring together the NHS Commissioning Board, NICE, the chief pharmaceutical officer, the NHS Confederation, the Clinical Commissioning Coalition, the royal colleges and industry.
An NHS panel recently declared that cataract surgery, knee replacement and other 'low clinical value' treatments must only be restricted on the basis of strict evidence-based criteria.