I am for legalisation of non-addictive drugs. As for the addictive ones, yes legalisation and regulation are certainly the best solution. However, you would have to undercut the cartels on price as well as provide expensive support to current addicts. This would eventually serve as a dramatic reduction in drug users (outside of recreational use) in only a few years.
A scheme such as this would never be implemented in the United States. Europe is a different matter (here in the UK, you can go to a heroin clinic to get your daily designated dose in a clean environment given that you are diagnosed by a doctor to be an addict).
Furthermore, the costs involved in sustaining such a scheme would be incredible. Sure, you can run comparisons with defence budgets and what not, but we simply can't afford it at the moment or the near future, nevermind the society's moral and ethics dilemma.
Here's a book I'd like to recommend if you havent read already.