Increasingly, genetic studies of tumors of the same histologic diagnosis are elucidating subtypes that are distinct with respect to clinical endpoints such as response to treatment and survival. This raises concerns about the efficiency of using the simple log-rank test for analysis of treatment effect on survival in studies of possibly heterogeneous tumors. Furthermore, such studies, designed under the assumption of homogeneity, may be severely underpowered. We derive analytic approximations for the asymptotic relative efficiency of the simple log-rank test relative to the optimally weighted log-rank test and for the power of the simple log-rank test when applied to subjects with unobserved heterogeneity, as reflected in a continuous frailty, that may interact with treatment. Numerical studies demonstrate that the simple log-rank test may be quite inefficient if the frailty interacts with treatment. Further, there may be a substantial loss of power in the presence of the frailty with or without an interaction with treatment.