GWENT Health Authority may be £9 million in debt by the end of the financial year - more than twice as much as predicted.

Rising drugs costs are the main reason for the potential overspend, which finance chiefs have dubbed a "worst-case scenario".

But an even more optimistic forecast, based on figures available to the end of July, is a debt of almost £7.5m, more than £3.3m above an overspend agreed with the National Assembly for Wales.

The health authority is "in recovery" after running up a deficit last year. A recovery plan agreed with the Assembly predicts a £4,145,000 overspend by the end of 2002/03, with the deficit clawed back during the next two or three years.

But there are several risks which may conspire to derail that plan. Drugs expenditure is by far the biggest, with early indications that price increases have been higher than recovery plan estimates.

The plan assumes a year-on-year increase in drugs expenditure of 10.4 per cent, but drugs expenditure is a volatile subject.

In the period to June 2002, the increase was 11.8 per cent compared to the period to June 2001, and the increase in the period to May was more than 17 per cent. It is very difficult to predict developments over the next few months.

Health Solutions Wales, the body responsible for compiling prescribing data, has yet to issue detailed figures for the current financial year. When these are made available, the health authority will be able to identify drugs that contribute to rising costs and draw up plans to tackle the problem.

Early indications, however, are of increases in average drug prices across all therapeutic groups.

Another potential risk troubling finance chiefs is the cost of medium-secure care. Gwent does not have its own provision and has to rely on a small number of specialist providers, exposing the health authority to higher- than-average service price rises. The high cost per case of providing such services also means the financial risk of even a small increase in patients is significant.

Health authority bosses also fear £1,756,000 of Assembly funding to provide free nursing care for eligible nursing home residents will not be enough. A further problem may involve the Welsh Risk Pool. Health authorities and NHS trusts contribute to this as a means of meeting negligence claims, but claims have increased severalfold in recent years, as have payments into the scheme.