The fund is an interim measure before the launch of the full Cancer Drug Fund in April 2011, and will pay for treatments that have been rejected as not cost effective by NICE.
The announcement came as a new report by Professor Mike Richards, England's National Cancer Director, showed the UK’s usage of new cancer drugs lags behind many other European countries.
Health secretary Andrew Lansley said: ‘Patients should have access to innovative cancer drugs that extend or improve their quality of life and which their doctors have recommended, which is why I’m determined to take action now.’
A regional body of clinicians and specialists will determine whether the fund should be used in individual cases, following a referral from the patient’s clinician.
The fund will be available from October and will run until April 2011, when the Cancer Drug Fund will begin. The fund is expected to benefit several thousand patients in the first six months.
However, ministers now say that the original promise of £200m may have to be revised in line with competing priorities.
Ministers rejected claims that the fund would undermine NICE’s role in appraising the cost effectiveness of drugs, saying the institute still had an ‘important part’ to play in the NHS reforms.
GPs’ role in referring patients to cancer specialists should not change following the launch of the fund, care services minister Paul Burstow said.
Instead, he added, GPs should focus on detection of symptoms and early diagnosis.
The report assessed international variations in drug usage across many disease areas, including use of statins, drugs for dementia and cancer treatments.
While there were large variations in drug use between countries, the UK was ranked eighth overall, behind Denmark, France, Spain and Switzerland.
In particular, the UK was ranked 12th out of 14 countries for use of new cancer drugs licensed in the last five years.