The British National Health Service yesterday agreed to pay for Roche's anti-cancer drug Tarceva (generic name erlotinib), but only after the company dropped its price to the same level as an existing therapeutic option, Sanofi-Aventis' Taxotere. Both are used for advanced lung cancer. That nation's National Institute for Health and Clinical Excellence, which conducts comparative effectiveness analysis, found that Tarceva provided no additional benefits over the existing option even though it cost about $3,700 more, according to a story in this morning's Wall Street Journal.

This news comes on top of another study released yesterday that showed giving lung cancer patients erlotinib in addition to existing drugs provided no additional benefit.

Erlotinib is one of a new class of targeted drugs. It attaches to epidermal growth factor receptor (EGFR) that exists on the surface of all cells, and inhibits cell division. Given the proliferation of EGFRs on fast-growing cancer cells, the theory behind erlotinib is that it would inhibit cancer growth by blocking the rogue cells' ability to divide.

Great theory. Alas, it proved less effective than hoped for once it was tested in a clinical setting. Much has been written about the promise of targeted therapies. Yet the results from clinical trials suggest that for many advanced cancers, these drugs are the therapeutic equivalent of throwing a boulder in the middle of a raging stream. The flow of water may back up for a short while, but the cancer quickly finds its way around the boulder and continues on its destructive path.

Yet companies are betting big on these new targeted therapies. Eli Lilly yesterday agreed to buy Imclone Systems for $6.5 billion. Imclone (yes, the same company that earned Martha Stewart a short stint in the federal pen for insider stock dealing) makes cetuximab, better known by its trade name Erbitux, which is a monoclonal antibody that also targets EGFR. The Food and Drug Administration approved cetuximab for colorectal cancers in 2004.

How good a drug is it that it would fetch such a hefty premium in the stock market? According to the FDA label, the pivotal clinical trials that led to approval showed adding cetuximab to existing chemo regimes that had failed increased the average amount of time before the cancer started growing again from 4.2 months to 5.7 months. Looked at from a population basis, just 23 percent of the 328 patients in the trial responded to the drug.

Though the drug clearly is no slam dunk, even for the quarter of patients who respond, Imclone set a price of $10,000 a month for the drug when it came on the market. Sales are already approaching $2 billion a year, and dozens of clinical trials are underway testing the drug for pancreatic, lung, head and neck and other cancers.

What justifies the high price the company has set on this drug? Clearly, it isn't based on the value of its efficacy. Great Britain has an agency that carefully evaluates the benefits of the drug, provides that information to its paying agency (the government-run National Health Service), which in turn negotiates what it considers a fair price for the drug. In the U.S., none of that exists. There is no agency to evaluate the drug's clinical value. The nation's largest paying insurer -- Medicare -- is prohibited from negotiating a fair price. And insurance companies are under pressure from patient advocacy groups -- most of which are financially supported by the drug companies -- to pay for the drugs no matter what the price.

The rising price of drugs with limited benefits isn't the sole reason why health care costs are skyrocketing out of control. But drug prices are a significant contributor. Until the U.S. creates new institutions and institutional arrangements to fairly evaluate and price drugs, cancer patients -- like Barack Obama's late mother, whose financial struggles as she fought cancer gets mentioned in his latest health care commercial -- will continue to worry about paying the extraordinarily high co-pays on cancer drugs even as they spend the final months of their lives battling the dread disease.