The National Institute for Clinical Excellence was set up to tell the NHS how to spend. Now it is focused on saving – and its latest advice affects everyone from cancer sufferers to new mothers, its chief executive tells Jeremy Laurance

The National Institute for Clinical Excellence (Nice), the Government's watchdog on new treatments, is to switch its focus from telling the NHS how to spend its money to how to save it, in a new drive to save NHS cash.

The independent organisation tasked with assessing which drugs and procedures should be made available on the NHS has already identified £600m-worth of savings that could be made from changing practice. Now it plans to increase its recommendations for savings in response to the public spending squeeze.

Nice has been dogged by controversy since it was established a decade ago to advise the NHS on how to spend to get the best results for patients. It has been the target of angry protests by patients' groups, charities and drug companies over its refusal to approve certain drugs which it judged as not cost effective.

Now it is set to court further protests as it gives greater prominence to recommendations that could save the NHS money.

Sir Andrew Dillon, speaking to The Independent before the election was called (when Nice, along with other public sector organisations, went into purdah, meaning it is greatly limited in the comments it can make), said the institute would adopt a "new emphasis" on identifying savings to reflect the "different circumstances the NHS finds itself in".

"Nice was established in 1999, a few years ahead of the biggest period of investment the NHS has ever seen," Sir Andrew said. "Now it is going to get very little real terms growth, which is the same as a cut [because of the growing pressures on the NHS budget]. We have to show that Nice is just as relevant over the next five years as it has been over the last 10."

The organisation will continue to assess new drugs and procedures as before and use the same threshold of £30,000 to £40,000 per quality adjusted life year – a measure of cost-effectiveness – to judge whether they should be made available on the NHS.

But it is revising its clinical guidelines, which set out protocols for treating conditions from heart disease to obesity, to highlight areas where cash can be saved. This includes recommending ceasing practices regarded as ineffective.

Nice has made around 150 recommendations a year since 2005 for areas where savings can be made, amounting to £600m of potential savings across the NHS. Examples include delivering cognitive behaviour therapy for depression by computer in place of a therapist, improved drug treatment for high blood pressure to cut the risk of heart attacks and strokes, and the use of long-acting contraceptive injections or implants for women who forget to take the daily contraceptive pill, reducing unwanted pregnancies and abortions.

"We have told our guidance groups they need to look very hard for savings and to emphasise them. We will go through all the advice and look at the threshold for referrals [to hospital] because that's the point at which all the costs of [hospital] care kick in."

Sir Andrew said the review of existing clinical guidelines would be complete by the end of the year. With researchers from the Cochrane database they were also looking at "evidence of overuse" of clinical practices to "see what the prospects [for savings] might be".

"We can put the NHS in the position it needs to be to make decisions about the services it is appropriate to fund. It is always about optimising clinical practice – what is the right level of use to give the best outcomes for the resources we have got. It is a new emphasis that recognises the different circumstances the NHS finds itself in."

Nice is already under fire for allegedly rationing treatments on the NHS. But of the 370 recommendations on the use of drugs or other technologies it has made since it was established in 1999, it has said "no" in just one in 10. In about two thirds of the remainder it has recommended some restriction compared with indications in the licence. The net effect has been to add at least £1.6bn annually to the NHS drugs budget.

Nice has encouraged the NHS to spend more money more quickly than would otherwise have been the case and the Department of Health has added around £150m a year to hospital budgets to accommodate its recommendations. Nice is now taking a tougher line with pharmaceutical companies on costs. In the last year it has forced at least three companies to agree "patient access" deals for new cancer drugs, reducing their cost to the NHS by up to half, bringing them within the Nice cost-effectiveness threshold.

In the past Nice was prevented from entering negotiations on price, and companies whose drugs were turned down walked away. But there is now a greater readiness on the part of the companies to recognise that in some cases the price is too high for the degree of benefit they bring. However, patients' groups complain that cancer sufferers are still being denied drugs that could help them. The Rarer Cancers Forum said 16,000 patients with unusual cancers, for which drug costs are higher because of their low numbers, were not getting the treatment they needed

Nice guidelines: Where costs could be cut

Depression and anxiety: Saving £250m

Cognitive behaviour therapy is a proven effective treatment. It can be delivered via a computer programme in some cases, although some patients prefer face-to-face contact with a therapist.

High blood pressure: £223m

Reducing blood pressure prevents heart attacks and strokes. Modern drugs work more effectively than old ones and, although they cost more, the extra cost is more than outweighed by savings in cardiovascular events.

Long-acting contraception: £107m

Forgetting to take the oral contraceptive pill is a common reason for unplanned pregnancies which may end in abortion. An injection or hormonal implant that lasts three months is more reliable.

Alzheimer's disease: £14m

Nice controversially restricted the use of three drugs shown to slow the disease's progression to people at the moderate stage, because they had too little effect at the early and late stages.

Flu, coughs and colds: £3.5m

Most respiratory infections are caused by viruses for which treatment with antibiotics is useless. Overuse of antibiotics also contributes to the growth of resistance. They should only be prescribed in limited circumstances.

Prostate cancer: £3.5m

Many cases of prostate cancer are slow-growing and aggressive treatment may be worse than the disease. In some cases invasive tests should be delayed and a policy of "watchful waiting" adopted, while in others radiotherapy may extend life.

Breast cancer: £1.3m:

Checking under the arm by ultrasound before beginning surgery on the breast can avoid unnecessary additional surgery on the lymph nodes.