The hospital's surgeons carried out ten pancreatic transplants
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Oxford's Radcliffe Hospitals NHS Trust has been chosen to run one of seven national centres for pancreas transplant operations.
The announcement follows the government's pledge to treble the number of pancreatic transplantations carried out in England and Wales to 150 a year in five years.
The city's John Radcliffe Hospital has already been carrying out the transplants for the past 18 months and has so far completed ten.
It is hoped that under the new unit - to which people from across the country will be referred - 20 such operations will be carried out each year.
Increased survival rate
Professor Peter Friend, who works in the hospital's Nuffield department of surgery, said the unit will make a major difference to diabetes sufferers.
Pancreas transplants are usually combined with kidney transplants for people with Type 1 diabetes and severe kidney failure.
Together they remove the need for both insulin injections and dialysis.
A combined pancreas and kidney transplant (compared to kidney transplant alone) increases ten-year survival rates from 30% to 80%.
Ministers hope the increase in pancreatic transplantations should meet the national demand by 2009.