Too many drugs are being prescribed to patients before the full side-effects are known, MPs have warned.
About 650m prescriptions are written by GPs each year
The health select committee said drug firms had become increasingly focused on marketing and some GPs had been too easily influenced by promotions.
It recommended an overhaul of the regulatory system in a bid to keep the pharmaceutical industry in check.
The industry and government both said they were committed to ensuring patients' safety was paramount.
The committee accepted medicines contributed enormously to the health of the nation, but warned the use of drugs was getting out of control.
About 650 million prescriptions are written each year by GPs and medicines cost the NHS more than £7bn a year.
The rise in drug use means the industry is now the third most profitable in the UK, behind tourism and finance.
But the MPs warned it had come with a cost, with adverse drug reactions responsible for 5% of all hospital admissions .
The committee said negative clinical trial results were being suppressed and there was a risk trials which produced positive results were not adequately designed.
And it said the promotion of medicines to doctors and patients lead to the over-prescription of drugs, citing painkillers such as Cox-2 inhibitors, which have been linked to heart problems.
The cross-party committee said the Department of Health had "for far too long optimistically assumed that the interests of health and the industry are as one".
It recommended the regulator, the Medicines and Healthcare Products Regulatory Agency (MHRA), be made more independent of government and industry.
In October a Panorama investigation exposed huge failings by the MHRA in its handling of the antidepressant Seroxat.
Committee chairman David Hinchliffe said: "The pharmaceutical industry is extremely powerful and influences healthcare at every level.
"Like any industry, drug companies need effective discipline and regulation, and these have been lacking.
"The industry, regulator, doctors and other prescribers must take their share of the blame."
But Dr Maureen Baker, honorary secretary of the Royal College of GPs, said family doctors had to rely on the regulators.
"GPs act in good faith and in the best interests of their patients."
Health Minister Lord Warner denied the industry and government were too close.
"The government has an effective and proper working relationship with the pharmaceutical industry.
"We are working with the industry to ensure they publish full details of their clinical trials data on the medicines we use and we will take any necessary further steps to strengthen these arrangements."
The MHRA recently announced it would "name and shame" and, when necessary, take legal action against drug firms which misleadingly promote their products.
Dr Richard Barker, director general of the Association of British Pharmaceutical Industry, said the committee had put forward a number of constructive proposals but that moves to limit the promotion of drugs would be a backwards step.
"It is critically important to patients, the NHS and the pharmaceutical industry that the public have trust in and benefit from advances in medicines," he added.
Liberal Democrats health spokesman Paul Burstow said: "We have to get much better at recording and learning from side effects and reactions to medicines."