The following correction was printed in the Guardian's Corrections and clarifications column, Monday October 23 2006
The Action on Alzheimer's Alliance includes patients, relatives and doctors, but not drug companies, as we mistakenly said in the report below.

Alzheimer's campaigners have lost their long and hard-fought battle to obtain new drugs on the NHS to treat people in the early stages of the disease, it was announced today.

The Alzheimer's Society, which is fronting the campaign, reacted with fury to a statement by the independent National Institute for Clinical Excellence (Nice) that it was rejecting its appeal and would recommend the drugs be used only in moderate disease, and not in the early stages. It called for the Department of Health to reverse the decision.

Three drugs, donepezil (better known by its trade name Aricept), galantamine and rivastigmine, do not work well enough in people with mild Alzheimer's to justify prescription on the NHS, Nice said. A fourth drug, memantine, should only be used within clinical trials. Patients already on the drugs, which have been in NHS use since they were approved by Nice in 2001 (Nice reversed its decision last year), should continue to get them.

"Alzheimer's is a cruel and devastating illness and we realise that today's announcement will be disappointing to people with Alzheimer's and those who treat and care for them," said Andrew Dillon, chief executive of Nice.

"But we have to be honest and say that based on all the evidence, including data presented by the drug companies themselves, our experts have concluded that these drugs do not make enough of a difference for us to recommend their use for treating all stages of Alzheimer's disease."

But campaigners in the Action on Alzheimer's Alliance, which comprises patients, relatives, doctors and drug companies, accused Nice of making its decision on financial grounds, even though the drugs cost only £2.50 a day (about £900 a year).

"What sort of society have we become when the health of hundreds of thousands is sold to save just £2.50 a day?" said Neil Hunt, chief executive of the Alzheimer's Society. "This blatant cost-cutting will rob people of priceless time early in the disease and later clinicians will have no choice but to use dangerous sedatives that increase the risk of heart disease and stroke. This is victimisation of the most vulnerable in society."

David Anderson, chair of the faculty of old age psychiatry at the Royal College of Psychiatry, called it "a terrible decision based on a deeply flawed process. Implementation of this guidance will set the treatment of Alzheimer's disease back 10 years while the number of sufferers continues to increase rapidly".

However, medical opinion was divided. "I agree with this decision by Nice," said Raymond MacAllister, professor of clinical pharmacology at University College London. "The problem with these drugs is that they have a very small effect in patients with advanced dementia which is of uncertain value. I would rather see resources allocated to the provision of better services for patients with dementia."

"Value for money is about setting the benefits to patients against the cost to the NHS," said Andrew Walker, a health economist at the Robertson Centre for Biostatistics. "In terms of the big picture of NHS spending this is probably the right decision, but way too late: the medicines have been available for nearly 10 years."

Two drug firms said they might seek a judicial review of the "perverse" decision. It was a sad day for patients, said Paul Hooper, managing director of Eisai. "In virtually every other disease, doctors are trained to find and treat patients early. However, with Alzheimer's, Nice is saying wait until patients deteriorate before you treat them. It makes no sense medically, no sense economically and no sense to patients and their carers."

Oliver Brandicourt, managing director of Pfizer in the UK, said: "Nice has ignored the evidence of patients, charities, researchers and doctors that these drugs are of benefit in the mild as well as moderate stages of the illness."

The government made it clear it would not get involved. A health department spokeswoman said it would be "entirely inappropriate" to overrule Nice's decision. "Nice was established to address precisely this kind of important but difficult question, on the basis of the evidence and free from political interference," she said.