This paper presents a summary of the evidence review group (ERG) report into the clinical and cost-effectiveness of erlotinib for the treatment of relapsed non-small cell lung cancer (NSCLC), according to its licensed indication, based upon the evidence submission from Roche Products to the National Institute for Health and Clinical Excellence (NICE) as part of the single technology appraisal (STA) process. The submitted clinical evidence includes one randomised controlled trial (RCT) (BR21) investigating the effect of erlotinib versus placebo, which demonstrates that erlotinib significantly increases median overall survival, progression-free survival and response rate compared with placebo. The majority of patients in the trial experienced non-haematological drug-related adverse effects. Currently there are no trials that directly compare erlotinib with any other second-line chemotherapy agent. For the purposes of indirect comparison, the manufacturer's submission provides a narrative discussion of data from 11 RCTs investigating the use of docetaxel. From these data the manufacturer concludes that erlotinib has similar clinical efficacy levels to docetaxel but results in fewer serious haematological adverse events; however, it is difficult to compare the results of BR21 with those of the docetaxel trials or with current UK clinical practice because, for example, the BR21 patient population is younger than that expected to present in UK clinical practice and almost half of the BR21 participants received erlotinib as third-line chemotherapy, with third-line chemotherapy being rare in the UK. The manufacturer's submission included a three-state model comparing erlotinib with docetaxel, reporting an incremental cost-effectiveness ratio (ICER) of 1764 pounds per quality-adjusted life-year (QALY) gained for erlotinib compared with docetaxel. Rerunning the manufacturer's economic model with varied parameters and assumptions increases the ICER to in excess of 52,000 pounds per QALY gained. There is still a large amount of unquantifiable uncertainty in the model and it is unlikely that erlotinib could be considered to be cost-effective compared with docetaxel at a willingness to pay of 30,000 pounds and there may even be the potential for docetaxel to dominate erlotinib. Because of the limitations of the indirect analysis undertaken by the manufacturer and the subsequent economic modelling exercise there is a need for a head-to-head trial comparing erlotinib with docetaxel. The guidance issued by NICE in February 2007 as a result of the STA states that erlotinib is not recommended for the treatment of locally advanced or metastatic NSCLC.