CORRECTED - (OFFICIAL)-UK's NICE rejects long-term use of Roche's Tarceva

(Corrects to make clear Tarceva is recommended as a second-line treatment, not first-line, after NICE corrects its press release)

* Watchdog says drug costs too much for maintenance use

* Once-a-day pill still funded as second-line treatment

LONDON, June 17 (Reuters) - Britain's health cost watchdog has rejected Roche's ROG.VX Tarceva pill for long-term use in lung cancer patients who have had treatment to stabilise their disease, because it is too costly for the benefit it offers.

The National Institute for Health and Clinical Excellence (NICE), which rules on which drugs should be paid for on the state-funded National Health Service (NHS), said it was not able to recommend the drug, also known as erlotinib, for long-term use, although it is already backed as a second-line treatment.

“In November 2008 we recommended erlotinib as a second-line treatment for non small cell lung cancer and we are disappointed not to have been able to recommend the drug as a maintenance treatment as well,” NICE Chief Executive Andrew Dillon said.

Trial data have shown that Tarceva, a blockbuster pill which is co-marketed by Roche and OSI Pharmaceuticals OSIP.O and had $1.2 billion in sales last year, can potentially extend life by approximately 3.3 months in lung cancer patients.

NICE said Roche had proposed a “patient access scheme” which would allow the price of Tarceva to be cut 14.5 percent to 1,395 pounds ($2,000) for a pack of 30 tablets -- a month’s supply.

But Dillon said NICE’s independent advisory panel felt Roche had made a number of inappropriate assumptions in its economic model, including underestimating the overall cost of the drug to the NHS.

“These issues led the committee to conclude that, on current evidence, the cost of the drug related to the benefits it brings means that erlotinib would not be a good use of NHS money,” he said in a statement.

Lung cancer is one of the most common cancers in Britain and the most common of all forms of the disease around the world. In Britain, around 38,000 people are diagnosed with it every year. (Reporting by Kate Kelland; Editing by David Holmes and Jon Loades-Carter) ($1 = 0.6746 pound)