NICE should base its cost-effectiveness calculations on hard evidence and to link it to what the NHS can afford, according to MPs.
In its second report on NICE, the House of Commons Health Select Committee told NICE to contract threshold-setting out to an independent body and to involve PCTs.
Committee members made no bones about NICE's role in underpinning NHS rationing and called for all new drugs to be appraised before launch.
They challenged NICE to examine older drugs and stop NHS payment for those that were not cost-effective.
While broadly supportive of NICE's work, members were sharply critical of political interference, particularly the intervention by former health secretary Patricia Hewitt in a PCT's decision not to allow Herceptin for a patient with breast cancer.
They challenged the government to allow NICE to do 'rough and ready' appraisals of all new drugs using a revisable lower cost-effectiveness threshold, as already happens in Scotland.
This method would allow doctors to prescribe 'useful and cost-effective drugs as soon as they are launched' and eliminate 'NICE blight' which can last for up to two years while a full appraisal is completed.
Appraising new treatments would remove political interference in the selection process. At the moment, NICE appraises new technologies selected by the DoH.
The committee launched a fierce attack on the NICE thresholds for cost-effectiveness. The Health Select Committee chairman, Rother Valley Labour MP Kevin Barron said: 'The figure (up to £30,000 per QALY) was determined by NICE and has no basis in hard science, no relation to NHS budgets and is almost certainly higher than those used by PCTs.
'The threshold has remained unchanged despite many years of increased investment in the NHS,' he said.
To discourage patchy implementation and postcode prescribing, 'NICE's threshold should be closely linked to that used by PCTs,' the report says.
NICE has welcomed the report as positive and helpful.
Health Select Committee report, live links at www.healthcarerepublic.com