Every day people walk into Murray's chemist, a small pharmacy in east London, to return unused medicines. They feel they are doing a good deed, that the medicines will be reused. In some cases, they have been told by their doctor to return the medicines. Little do they know that the drugs will be incinerated.

Every three months a private company, employed to dispose of NHS clinical waste, sends a van to Murray's and other local pharmacies to collect these returned medicines, which are transported to an incinerator and destroyed.

The pharmacist, Chandrakant Patel, empties the contents of six yellow, plastic clinical bins on to a table. There are bottles of anti-fungal shampoo, painkillers and bandages. The majority of the drugs are used to treat high blood pressure, asthma and diabetes, and most are in unopened packets. Some 90% of these medicines are within their expiry date. From the pile, Chandrakant pulls out two unopened inhalers for asthma, each costing £59, and two boxes of entacapone, a drug used to treat Parkinson's disease, which together cost £115. The total cost of this quarter's medicine mountain is £2,884. Over a year, Murray's will send more than £13,500 worth of medicines to the incinerator.

Across England, where there are close on 11,000 local pharmacists, many bigger than Murray's, the value of medicines returned by patients is likely to top £150m. This comes at a time when the NHS is having to find savings of £20bn by 2015.

"It's shocking and the public needs to know about the cost of this wastage," says Patel. "It breaks our hearts seeing this waste day in day out, but we are not allowed to redispense these medicines, otherwise we are done for fraud."

The NHS spends £12bn a year in England on medicines, approximately 10% of its annual budget, of which £8bn is spent in primary care. Over the past decade the number of prescription items has increased by nearly 70%. In 2000, 552m prescription items were dispensed in England, and the average number of prescription items per head of the population was 11.2. By 2010, it had risen to 927m items and the average number per head was 17.8.

A National Audit Office report in 2007 found drug wastage to be a significant cost for the NHS and said there was scope to improve the efficiency of prescribing in primary care. In 2010, research by the York Health Economics Consortium and the school of pharmacy at the University of London, put the annual figure in England at £300m. It estimated that up to half of the waste could be avoided. But Jonathan Mason, a Department of Health adviser and until April 2012 national clinical director for primary care and community pharmacy, believes there are far greater savings to be made by increasing the number of people taking their medicines properly.

"Studies repeatedly show that one third to one half of prescriptions are not taken as intended. And there are poor outcomes with poor compliance," he says.

People with high blood pressure who do not take their medicines are at a higher risk of having a stroke or a heart attack. Similarly, people with diabetes are at an increased risk of complications. Mason says: "Five per cent of all emergency admissions are because people do not take their medicines as prescribed, and this is estimated to cost the NHS [in England] £500m". Yet he feels this is a gross underestimate. "Patients admitted with falls and fractured hips are not coded with the reason for the fall, when often the inappropriate use of medicines has been a major factor."

He believes that local pharmacists could do more with patients, advising on their medications and working out what is the best drug regime for them. Rob Horne, professor of behavioural medicine at University College London's school of pharmacy, says unintentional reasons for not taking prescription medicines include forgetfulness; the drug regime being too complicated; or people paying for a three-month course of drugs, because it is cheaper than separate monthly prescriptions, and then stockpiling the medicine.

Intentional reasons include choosing not to take a drug or, more common, deciding not to complete the course.

Horne says: "We need to understand the beliefs, preferences and feelings that motivate us. To take a medicine, you have got to believe that you really need it. Prescribers need to develop a story that is meaningful to patients, find out what the patients' concerns are, address them and make the treatment as easy and convenient to take as possible."

Tony Avery, a GP and professor of primary health care at the University of Nottingham, agrees that local pharmacists could be more clinically involved in patient care. "Pharmacists are highly trained professionals but the problem is the way that pharmacies are set up. They are small businesses and they are pushed into a dispensing role, and risk losing some of their clinical knowledge."

Avery believes that medication reviews – where a health professional discusses with a patient what medicines they are taking, any possible side-effects, and if they aren't taking their drugs, why not – can have a real role in improving compliance. But, he points out, "these reviews often get squeezed to the end of a consultation so are not always done properly".

Shorter treatment courses and reducing the length of repeat prescriptions from three months to one or two months may also improve compliance and reduce wastage. In a 2011 Ipsos Mori poll commissioned by the NHS sustainable development unit, 52% of the public said they would accept reused medicines that had been checked for safety. David Pencheon, director of the unit, says: "The public tells us they are prepared to take reused medicines but the system doesn't make it easy, and there aren't the incentives."

Pencheon would like to see financial rewards for NHS organisations that return unused medicines to the supply chain. He adds that much more effort needs to go into reducing polypharmacy (where many drugs are prescribed) and into improving compliance. He believes there should be greater use of non-drug therapies, such as talking therapies instead of antidepressant medication, or walking therapies to help people lose weight and be at less risk of developing diabetes and heart disease.

The NHS has one of the biggest carbon footprints of any organisation in Europe, according to the NHS sustainable development unit, and the procurement of pharmaceuticals is one of the largest factors because of the energy used in the drug manufacturing process. As a result, Pencheon thinks it could be helpful to see "both the financial cost and environmental impact of the drug on the packaging", in order to raise awareness.

"The problem is, incentives are poorly aligned to make us do what a reasonable person would want us to do. People have the power to create a better system but are not rewarded to do this," he says.

However, Martin Astbury, president of the Royal Pharmaceutical Society, points out that the cost of recycling systems could outweigh the financial benefit. "If there is a system, it would have to be absolutely safe and secure. There are counterfeit medicines circulating that people have bought from rogue internet sites."

The Department of Health facilitated a steering group in 2011 to develop an action plan on how best to reduce the costs of waste medicine. A department spokesman says: "By reducing medicines wastage the NHS will save money that can be spent in other areas of patient care. The [steering group] is now finalising its report, which we await with interest."

Meanwhile, it looks as though Murray's medicine mountain will keep growing and the van will soon be back to collect thousands of pounds' worth of more discarded drugs destined for the incinerator.