Primary care groups have warned that soaring drug costs could lead to city-wide overspends of up to£1m.
The cost of some cheaper, unbranded medicines has risen dramatically this year. One commonly prescribed diuretic, frusemide, has risen in price by more than 600 per cent, to£2.14 for 28 tablets.
Health authorities in Manchester and Birmingham have warned that prescribing budgets could be overspent by£650,000 and£1m respectively.
PCGs, attempting for the first time to manage cash-limited prescribing budgets, are having to cancel plans for investment in new services. Prescribing costs were brought into an overall unified budget when PCGs were launched last April.
Dr Michael Dixon, chair of the NHS PCG Alliance, said: 'Pre-scribing budgets are the first big test for PCGs. Savings on drugs budgets are the only funding for developing primary care and introducing more services.'
Family doctors and HAs have also been hit by a shortage of generic medicines. Pharmacists have been forced to dispense branded drugs even if the prescription is made out for a cheaper, generic product.
Dr Greg Wilcox, vice-chair of the National Association of Primary Care, said: 'PCGs are having to confront the realities of cash restraints very early.'
Dr Wilcox, who chairs Hastings and St Leonards PCG, said: 'It doesn't help to launch PCGs with such pressure on their prescribing budgets. A number of people have contacted us to say they have projected overspends of hundreds of thousands of pounds.'
PCGs in Manchester are some of the hardest hit. Manchester HA is predicting a£644,000 prescribing overspend by its four PCGs 'even after allowing for full use of the contingency fund'.
Dr Ivan Benett, chair of West Manchester PCG, said the city was being 'penalised' because it had kept drug costs under control in the past with a high rate of generic prescribing.
David Dawes, chief executive of East Manchester PCG, said his group alone was facing a£160,000 debt by the end of this financial year. 'The cost of some of these drugs has gone up by 10 times. It is very disappointing because we have had a lot of success getting GPs to prescribe generically to save money.' The PCG had been forced to freeze all plans to develop primary care services for six months, he added.
Birmingham PCGs have also warned they risk going over budget. Birmingham HA pharmaceutical adviser Richard Seal said the overspend was a problem for HAs across the Midlands. 'We are looking at an overspend of£800,000, but at the moment our overspend is just on£1m.' But it was still 'early in the financial year', he added.
Neil Mortimer, chief executive of Small Heath PCG in Birmingham, said his PCG had 'top-sliced' a percentage of the prescribing allocation and taken money from the unified budget to fund a risk management scheme.
A spokesperson for Manchester HA said it hoped the government's agreement with drug companies to cut the cost of branded medicines by 4.5 per cent, which comes into force next month, would help to offset some of the overspend.
The British Generic Manufacturers Association blamed 'price fluctuations' and shortages on the suspension of one company's licence and the attempts of other manufacturers to meet the resulting increased demand. It warned of further possible problems, including panic buying ahead of the millennium.