The ruling means that doctors should decide who gets treatments on the NHS until the government issues formal guidance.

It also means that the government cannot place similar restrictions on so-called lifestyle drugs - such as pills to combat shyness and obesity - that are due to be launched in the near future.

The BBC's Fergus Walsh: This could be extremely expensive for the NHS

The ruling applies to the interim guidance on the drug issued in September 1998, but does not affect the formal guidance published earlier this month.

The court also ruled that the health circular - which put the interim restrictions in place - was in breach of European law.

Damages claim possible

Drug company Pfizer, which manufactures Viagra, brought the case. It challenged the Department of Health over the interim restrictions.

BBC Health Correspondent Richard Hannaford reports on the impact of the ruling

David Pannick, QC, who represented the company, said the company may launch an action for damages if the government fails to have the decision overturned on appeal.

The cost of such damages could run into millions of pounds.

The company is also considering challenging the formal guidelines issued on 7 May.

"A speedy decision is going to be taken. Very urgent consideration is now being given to this," Mr Pannick said.

Pfizer chairman Ken Moran reacts to the ruling

Ken Moran, chairman of Pfizer, said: "While we are pleased and welcome today's decision, it gives us no pleasure to use legal recourse to identify what amounts to an unlawful government action.

"We hope this result will ensure that in the future any plans to limit the availability of new medical treatments will have to be formulated within the proper legal frameworks."

Cost fears

The Department of Health had told doctors not to prescribe Viagra until further notice, apart from in exceptional circumstances.

Frank Dobson said the ruling does not affect the government's current position

It feared that excessive demand for the drug, which was licensed for use in the European Union last September, could cost the health service more than £1bn a year.

On Wednesday, Mr Justice Collins said Health Secretary Frank Dobson's interim advice unlawfully interfered with a GP's duty to exercise professional judgement on whether patients should receive a treatment.

Mr Justice Collins said the government advice "was intended to be acted upon independently of whether in (a doctor's) professional judgement a patient needed treatment" for impotence.

This ran counter to a doctor's legal duty to prescribe "the best such treatment available, namely Viagra", he said.

Government gains right to appeal

Following the ruling, Mr Dobson said: "This judgement was about the interim guidance to GPs.

"The judgement has made it clear that life has moved on and doesn't relate to what we have been doing since then.

"The procedure we have followed in developing the new criteria for Viagra on the NHS announced on 7 May is in line with the judgement."

The department had not yet decided if Mr Dobson would make a statement to the House of Commons about the issue, she said.

The court gave Mr Dobson leave to appeal and ordered him to pay Pfizer's costs.

'Inept handling'

Shadow Health Secretary Ann Widdecombe said: "The High Court's decision is a serious blow to Frank Dobson's policy of rationing drugs and treatments in our health service.

Ann Widdecombe blamed the ruling on ineptitude

"We have always acknowledged the necessity to set clinical priorities and some limitation on the availability of Viagra was inevitable. Frank Dobson, however, has handled the whole matter ineptly."

She added: "The floodgates are now open. The scope of this decision has the potential to go way beyond Viagra to countless other innovative but expensive drugs and treatments."

Liberal Democrat Health spokesman Simon Hughes said the decision was "the fault of Frank Dobson alone".

"This ruling shows that rationing decisions must be made in the open and not behind closed Whitehall doors," he said.

"The NHS could now be forced to pay the Pfizer drug company compensation that should be spent on frontline patient care."

NHS rationing

GPs said they were placed in an impossible position by the government's Viagra rules.

On the one hand, they were expected to follow the interim guidelines which said it should not be prescribed other than in "exceptional circumstances".

But they had also to work within their terms of service, which say they must prescribe a licensed medicine where it is clinically necessary.

The government's full guidance placed Viagra on the so-called Schedule 11 - a list of drugs restricted on the NHS.

Although this increased the number of patients eligible for Viagra from 15% to 17% of the impotence sufferers in the UK, Pfizer argues this is still too restrictive.

Guidance becomes effective in July

The new guidance becomes effective on 1 July, when doctors' terms of service will be changed.

Dr John Chisholm said the BMA's position had been sound all along

Dr John Chisholm, chairman of the British Medical Association's GPs committee, said Wednesday's High Court ruling did not surprise him.

"The GPs committee took its own legal advice months ago and as a result advised all family doctors to prescribe Viagra as clinically necessary."

He said the BMA would maintain this position until 1 July.