The UK has an unusually severe drugs problem and the government's strategy has had a very limited impact on drug use, a new watchdog body has been told.
Experts will analyse the UK's drug policies
The report for the independent UK Drug Policy Commission said more addicts were being treated.
But it added that the benefits were limited, and there was little evidence education schemes had had an impact.
The Home Office insisted the strategy was working - with a 16% decline in drug use since 1998.
BBC home affairs correspondent Danny Shaw said the report was part of the debate about the government's 10-year drug strategy, which is due to be updated next year.
Attempts to restrict the availability of drugs by arresting dealers and seizing supplies were failing and drugs prices on the street were falling, the report argued.
And the benefits of drugs treatment programmes were limited because some users relapsed and many went untreated, it added.
The UK Drug Policy Commission (UKDPC) - chaired by Dame Ruth Runciman - has been set up to analyse drug policy in the country and is being funded with a three-year grant from a charity, the Esmee Fairbairn Foundation.
Twelve experts have been recruited from the drug treatment and medical research sectors, as well as some from policing, public policy research and the media.
They include homeless charity Shelter's chief executive Adam Sampson and the head of the Medical Research Council, Professor Colin Blakemore.
The report says that as well as having the highest level of problem drug use in Europe, the UK has the second highest number of drug-related deaths.
The study found about a quarter of people in the 26-to-30 age group had tried a Class A drug on at least one occasion.
The value of the illegal drugs market in the UK is put at £5bn a year, and the cost of drug-related crime in England and Wales is estimated at more than £13bn.
About one in five people arrested is a heroin addict, the report adds.
Drug addiction rates in the UK are double those in France, Sweden, Germany and the Netherlands.
There has been a 111% rise in the number of people jailed for all drug-related offences between 1994 and 2005.
However, street prices have dropped - with heroin falling from £70 a gram in 2000 to £54 in 2005.
The report said: "Tougher enforcement should theoretically make illegal drugs more expensive and harder to get.
"The prices of the principal drugs in Britain have declined for most of the last 10 years and there is no indication that tougher enforcement has succeeded in making drugs less accessible."
But the report's authors, Professor Peter Reuter and Dr Alex Stevens, say policies are succeeding in tackling certain illnesses and some aspects of criminal behaviour linked to drug use.
Dame Ruth said: "The commission does not start from the position that all UK drug policy has failed, but rather that we do not know enough about which elements of policy work, why they work and where they work well."
The debate on drugs was often "sensationalised and polarised", she added.