The number of patients who die after being given the wrong medicines or who suffer fatal side-effects to powerful drugs in NHS hospitals has risen five-fold in the past decade, an official assessment reveals today.

The huge increase in adverse reactions is partly because hospital pharmacies do not have the computer systems needed to keep pace with modern medicine, the Audit Commission says.

The problem may also be due to "the increasing pace of work in hospitals and to the greater toxicity of modern medicines".

Serious shortcomings in the way medicines are managed are identified by the report, which examines how the £1.5bn bill for drugs in NHS hospitals each year is spent.

In-house pharmacies are frequently understaffed and they are not treated as core clinical services, the Audit Commission says.

The cost to the NHS of errors and adverse reactions to drugs is estimated at £500m a year because patients have to stay longer in hospital.

In 1990, the problem resulted in the deaths of more than 200 patients in England and Wales, but last year, about 1,100 people died.

Nick Mapstone, the report's author, said the number of deaths had to be seen against a large increase in patient numbers, but medication errors were still too frequent.

He said: "Patients are coming into hospital and not getting a proper medication history taken so they are given drugs they are allergic to. They are not screened properly and are given drugs they shouldn't be."

The report, called A Spoonful of Sugar, says that 7,000 doses of medicine are administered daily in a typical hospital, which takes up to 40 per cent of nurses' time.

Errors are occurring because of incomplete and illegible hand-written prescriptions, as well as a failure to check medical histories. Pharmacists are too removed from patients to be able to anticipate glaring mistakes, the report says.

Mr Mapstone said: "Whilst medical science has advanced dramatically, the way in which drugs in hospitals are given has not kept pace.

"They are becoming more powerful and potentially more dangerous. Yet we don't think doctors and nurses are getting enough support from the people who understand medication – the hospital pharmacists."

The Department of Health said 10,000 hospital patients a year had serious reactions to medicines. It also accepted that these incidents accounted for 20 per cent of clinical negligence claims.

In one recent case, a 25-year-old London man did not receive potentially life-saving drugs for meningitis because they were given to another patient with the same surname. In another case, a teenager with cancer died after a powerful drug was wrongly injected into his spine.

The Commission's report says the Department of Health must put more money into the problem and develop electronic prescribing and automated dispensary systems for all hospitals to improve efficiency and reduce errors.

One sixth of pharmacy posts are vacant and half of all hospitals are unable to provide comprehensive pharmacy services because of staff shortages, the report adds. To address this, trusts should carry out staff audits and consider putting more money into pharmacies.

"Great strides are needed to make medicines management practice in all hospitals match the level of the best," it warns.

Patients take into hospital about £90m worth of their own medicines each year, much of which is thrown away. But the report says that much of this waste could be prevented if it was checked to see if it was suitable for reissue.

A spokeswoman for the Department of Health said the National Patient Safety Agency had been set up to address such problems and a target had been set to reduce the number of serious prescribing errors by 40 per cent by 2005.