The Open University's bid to run undergraduate medical degrees in partnership with medical schools has been turned down by the Higher Education Funding Council for England and the Department of Health.
The funding council gave the OU £100,000 to develop a flexible, part-time route of entry to year three of existing undergraduate medicine courses in February 2000.
Hefce and the DoH Joint Implementation Group, which is expected to announce the results of the latest bidding exercise for 1,000 medical school places at the end of this month, is understood to have turned down the bid on the grounds of cost.
The OU said: "An opportunity has been missed to broaden access to medicine for those whose personal circumstances prevent them from undertaking four or five years of full-time education.
The course could have taken 500-plus students a year. Lynne Orton, the administrative coordinator for medical education at the OU, said: "It is initially costly to develop good-quality course materials and quality assurance... Real savings come when the course is up and running."
The funding council is understood to have wanted the OU to cross-subsidise the course in its early days, or to have delivered it through the e-university.
"It would not have been appropriate to go through the e-university because this is not a totally online course," said Dr Orton.
Bristol University had bid for 35 places in partnership with the OU. Leeds, Leicester/Warwick, Manchester, Newcastle and St George's had also been interested.
It is understood that King's College, London, which bid for 50 places, and Imperial Medical School, which bid for 100 places in collaboration with the University of Hertfordshire, have also been turned down.