Price portrays horror film star Paul Toombes. Several people close to Toombes are murdered by someone dressed as Toombes screen alter ego, Dr. Death. The story allows for clips of Price's films, primarily his work with Roger Corman, to be shown. Dr. Death bears strong resemblance to Price's character of Dr. Phibes. It could be that the film was hobbled by a limited budget or a hastily written script, but much of Madhouse suggests that there could have been more cleverness that no one had the time or interest to explore.

In addition to the films within the film, the act of seeing is further touched on in other ways. Clark employs several shots of Price looking at his reflection. There are also some shots looking through the lens a television camera. The film is about Paul Toombes possible confusion between himself and his screen character, as well as the perception audiences may have of actors to closely aligned with a specific character. The ideas are familiar ones, but the problem with the film is that more could have been done. Madhouse seems to have been made with the idea that a few in-jokes, like seeing Peter Cushing dressed as a vampire, would be sufficient to entertain the fans. Madhouse almost gets it right with the scenes of Adrienne Corri as the deranged wife Cushing keeps in his basement. The biggest horror of Madhouse is that it is ultimately a film comprised of missed opportunities, from a studio that never fully appreciated the star that helped bring them substantial financial success.