Thousands of rheumatoid arthritis patients will stand to benefit and arthritis charities have hailed the decision.
Rheumatoid arthritis is a painful and sometimes crippling autoimmune disease that affects an estimated 400,000 people in the UK. It occurs when the immune system attacks the joints, causing swelling and damaging cartilage and bone.
MabThera, the Roche brand name of the drug rituximab, is a synthetic antibody that targets one of the key immune system cells involved in rheumatoid arthritis.
Antibodies are molecules in the blood or secretory fluids that tag, destroy, or neutralize bacteria, viruses, or other harmful toxins.
The drug is already freely available to patients in Scotland after a similar decision by Nice's counterpart, the Scottish Medicines Consortium.
MabThera's relatively low cost is part of the reason for its approval by Nice. At £4,657 to treat one patient for a year the drug is almost half the price of other therapies.
The total cost of the disease in England alone, including health care and indirect costs such as lost working days, has been estimated at up to £1.2bn a year. Anti-TNF (tumour necrosis factor) drugs, the most advanced current treatment for severe rheumatoid arthritis, cost around £9,000 a year.
These drugs work by switching off tumour necrosis factor (TNF), which stimulates cells to produce the inflammation response that leads to pain and swelling of the joints.
MabThera will be available to NHS patients who fail to improve after first being given an anti-TNF drug.
A spokeswoman for the Arthritis Research Campaign, which sponsors research into the disease, said Nice's decision gave patients who failed to respond to anti-TNF therapy "a lifeline".
An article in the June edition of medical journal The Lancet highlighted the success of MabThera in slowing the progression of rheumatoid arthritis. The study found it reduced symptoms by more than 50% for more than a third of patients.
MabThera is claimed as the first and only selective B cell therapy for rheumatoid arthritis offering a fundamentally different treatment approach.
B cells play a key role in driving the disease process and MabThera is thought to break this process.
Both the European Union and the US Food and Drug Administration approved the drug last year.
Rheumatoid Arthritis is one of the most common forms of autoimmune disease which affects more than 21 million people worldwide, with as many as 3 million sufferers in Europe alone.
The term "autoimmune disease" refers to a varied group of more than 80 serious, chronic illnesses that involve almost every human organ system. It includes diseases of the nervous, gastrointestinal, and endocrine systems as well as skin and other connective tissues, eyes blood, and blood vessel. In all of these diseases, the underlying problem is similar--the body's immune system becomes misdirected, attacking the very organs it was designed to protect. For reasons we do not understand, about 75 percent of autoimmune diseases occur in women, most frequently during the childbearing years.