Hundreds of thousands of Britons who suffer from Alzheimer's disease are to be given a massive boost tomorrow when government experts finally conclude that the benefits of at least three breakthrough drug treatments outweigh the financial costs.

Following an outpouring of protest from thousands of families whose relatives have been helped by the drugs, the National Institute for Health and Clinical Excellence (Nice) will reverse its earlier plan to ban the treatments which cost the NHS £60m a year. Instead, it will conclude that Aricept and other similar drugs should be given to patients in the early stages of the disease, when they have mild or moderate dementia.

However, sources have told The Observer that Nice, which monitors health costs, will say there is not enough firm evidence to justify giving the drugs to patients who have severe dementia. This decision is likely to provoke controversy because psychiatrists believe that the newest drug, Ebixa, also alleviates the agitation and aggression suffered by people in the later stages of Alzheimer's.

Alzheimer's disease affects around 400,000 people in the UK, and is a progressive and incurable condition which is usually first seen with the loss of memory, followed by confusion and disorientation. As the population ages, the number of cases is due to rise steeply - already one in five people over the age of 80 suffers from the condition.

The long-awaited announcement marks a landmark decision for the NHS, ending one of the most difficult consultations ever undertaken over a particular set of drugs.

The appraisal system set up by Nice, a body of experts charged with looking at the cost and clinical effectiveness of new treatments, has highlighted the difficulty of assessing new drugs which are not curative and which do not work for everyone. Aricept can delay the onset of Alzheimer's symptoms such as memory loss and personality changes by around one year for between a half and two-thirds of patients, enabling them to stay at home for longer rather than having to go into nursing homes.

Tomorrow's announcement by Andrew Dillon, the head of Nice, will stress that the drugs are important, but must only be given once patients have been seen by a specialist and received a proper diagnosis. He will argue that more evidence needs to be gathered before they can justify the prescribing of Ebixa to those in the later stages of the disease.

There will also be a further three-month 'review' period during which all the interested parties, including families and drugs companies, can make their views known, although it will be stressed that it is highly unlikely that this decision will be overturned.

Professor Cornelius Katona, an Alzheimer's expert and Dean of the Kent Institute of Medicine and Health Sciences, said that although the decision to give the drugs to those with mild to moderate dementia would be welcomed, he would be worried if people with severe dementia were excluded.

'I know from seeing patients that the drugs may help alleviate the agitation and the aggression, and that can have a huge impact on their carers. Nice may say that there is insufficient hard evidence to show that it has a beneficial effect on such patients, and it can be quite difficult to assess, but there is really no other treatment for these symptoms, given that, quite rightly, we can no longer prescribe anti-psychotic drugs because of their side-effects.'

Last March, carers and doctors were stunned to learn that Nice had suggested in draft proposals that four drugs were not cost-effective, because they did not work for all sufferers.

Three of the drugs, rivastigmine (brand name Exelon), donepezil (Aricept) and galantamine (Reminyl), cost around £2.50 per day per patient, resulting in an NHS bill of £60m a year. They belong to a class known as cholinesterase inhibitors, and were approved for use on the NHS in 2001.

They are currently prescribed to some 54,000 patients, but that is only a small proportion of the number who should be on the drugs. The fourth drug is Ebixa, also known as memantine, which costs £69 a month. This is the first in a new class of drugs called NMDA receptor antagonists which appear to have a protective effect on the brain, slowing down progress at the later stages of the disease.

The latest evidence suggests that 20 per cent of Alzheimer's patients do very well on the drugs, and up to 68 per cent derive some benefit. Campaigners say that to withhold the only treatment available to sufferers is immoral.