Cash to fund the early entry into hospitals of hundreds of potential new treatments for rare diseases and disorders has been withdrawn.
NHS England said financial pressures meant it had had to cancel the £50m innovations commissioning fund.
The more than 600 NHS and non-NHS applicants that had hoped to provide these specialised services will now miss out.
The fund was announced two months ago with the promise it would save lives.
The idea came from a widespread review of innovation in the NHS that David Cameron launched in December 2011.
He said he was determined to invest in innovation as "it is becoming ever more essential to get your products tested and adopted in the NHS much more quickly".
He later warned that "the newest innovations are often the lowest hanging fruit" when health systems are looking hard for savings.
John Murray, Director of the Specialised Healthcare Alliance, which campaigns on behalf of patients in need of specialised care, described the decision as, "bad news for people with rare and complex conditions".
He said it casts serious doubt on NHS England's commitment to innovation and said "we need to avoid reversion to piecemeal introduction of technologies".
Writing to all fund applicants, NHS England, who are constructing a five-year plan for specialised services commissioning, said it remained "committed to both leading and facilitating the uptake and spread of innovation" but regretted that financial pressures meant the fund was unlikely to be opened in the next financial year.
Specialised services - services that affect hundreds of thousands of people across England - cost about £12bn a year, which is about 10% of the NHS's annual budget. £500 million of that is spent on highly specialised services, each of which usually affects fewer than 500 people across England.
A senior clinical researcher who had registered for the fund, and wishes not to be named, said: "Withdrawing this amount of money is scandalous at such short notice."
He said the process had wasted a lot of patients' and clinicians' valuable time.
NHS England apologised unreservedly to applicants.
It added that no applicants had been told their project had been accepted, and no patients told they would receive any treatment or therapy as a result of the hundreds of applications.
The commissioning of specialised services has been centralised since April and is now the sole responsibility of NHS England who said they had encountered "unplanned expenditure" in unifying approaches, standards and services.
The innovations commissioning fund was a move to cut red tape so that proven therapies could be used in NHS hospitals more quickly, to assess their cost effectiveness and determine if they could be adopted more widely.