Women should be refused the "last-ditch" drug even though the firm which manufactures it has offered to pay for the first doses, with the NHS only paying for further courses if it is shown to work.
Trials of the drug lapatinib, also known as Tyverb, have shown it can reduce the size of a tumour by 60 per cent and extend life by an average of two months, compared to standard treatment.
But the National Institute for health and Clinical Excellence says it does not extend life by long enough to justify the extra cost.
The drug, which costs £1,068 for a four-week supply, has received its European licence, making it available on private prescription to patients in the UK.
Lapatinib works on a type of breast cancer known as HER-2 positive, so called because the tumour produces the protein HER 2 which fuels its growth.
This form of the disease accounts for around a fifth of the 45,000 cases of breast cancer each year.
The treatment is for women who have already received chemotherapy and the drug Herceptin, which is regarded as the gold standard treatment to stop the cancer returning, but whose cancer is still growing. It is thought 2,000 women each year could benefit from the drug.
The makers GlaxoSmithKline have offered to provide the treatment free for the first 12 weeks and the NHS would only pay for extra doses if it is still working after that.
But Nice has ruled in draft guidance that even with this offer the treatment is still not cost effective.
The drug is being given to patients in Austria, Denmark, Germany, Greece, Ireland, Luxembourg and Switzerland.
Jane Tomlinson, the cancer campaigner who died of the illness last year at the age of 43, was told by her NHS drug that she could not have the drug.
She was eventually given access to the drug as part of clinical trials.
Because the drug must be given in combination with another treatment and it provides only a limited extra survival, it breaches the cost effectiveness threshold set by Nice, three times over.
The row is over the fact that women in the late stages of breast cancer are receiving Herceptin even when it has stopped working for them and GlaxoSmithKline has argued it is this group who should be switched to lapatinib, which costs about the same and has been shown to work.
But because patients should not be receiving Herceptin in these circumstances anyway, Nice has argued that lapatinib cannot be compared to it in this way.
Simon Jose, General Manager for GSK UK Pharmaceuticals said: "Given our involvement, it is difficult to comment without the appearance of self interest, however we strongly believe that the wrong decision has been made for patients, doctors and the NHS.
"For patients with Her2-positive advanced breast cancer and who have few treatment options left, Tyverb (lapatinib) offers real hope of slowing the disease. We therefore remain wholly committed to working with the NHS and NICE to make this innovative medicine available."
Professor Peter Johnson, Cancer Research UK's chief clinician, said: "We are disappointed that the clinical evidence presented to Nice does not appear to be sufficient for them to recommend lapatinib on the NHS.
"Nice often has extremely difficult decisions to make, but we believe a negative decision from Nice should lead to positive action. This is an area where the Government can work closely with Nice, the pharmaceutical industry and funding bodies such as ourselves to carry out further research into the true role of lapatinib."
The guidance from NICE is still in the draft stages and is open for consultation.
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