From November, pharmacists will be reimbursed a fixed amount for 60 commonly prescribed special order products - expensive, bespoke medicines for patients who cannot tolerate licensed versions.
The DoH said it would give the NHS 'value for money' for 'specials'.
Before the deal was struck, there was lack of mechanisms to control NHS spend on specials.
As a result, prices were more than a quarter (27%) higher in the first quarter of 2011/12 than the same period two years before. The number of items prescribed also jumped 23% in this time.
In 2010/11, annual spend topped £134m, a jump of 13% in one year alone.
Various approaches have attempted to stem rising prices, including new guidance on prescribing and legislation allowing price lists to be shared, but neither appears successful.
Now, the drug tariff, to launch in November, is a more direct approach to rein in spending.
A DoH spokesman said: 'The new arrangements will create a more transparent system for reimbursing special order medicines by linking the cost of reimbursement to the cost of the product and providing value for money for the NHS.
'A drug tariff reimbursement price will create an incentive for dispensing contractors to procure in a manner that is cost-effective for the NHS, while also ensuring patients receive the medicine they need.'
A spokeswoman for the Association of Commercial Specials Manufacturers (ACSM) said: 'If the net result is an end to uncontrolled price inflation within the distribution chain, then this will be a positive thing for the industry and will ultimately have the effect of reducing the overall spend on specials.
'As manufacturers, we believe the tariff acknowledges us as a high quality source of supply that is aiming to offer best value for money to the NHS.'
