Using illegal drugs is like gambling or eating junk food and there needs to be a wholesale review of the Government's approach, the independent body that analyses drug laws has said.
There are "some moderately selfish or risky behaviours that free societies accept will occur and seek to limit", the final report of the UK Drug Policy Commission (UKDPC) said.
Its six-year study found much of the £3 billion the UK spends annually on tackling illicit drugs is not based on evidence and, until Government pursues policies based on what works, it will continue to waste public money and damage lives.
Calling for a "wholesale review" of drugs laws and the classification system, it said possession of small amounts of drugs for personal use should be made a civil offence instead of a criminal offence.
Some 42,000 people in England and Wales are sentenced each year for the possession of drugs, with about 160,000 people given cannabis warnings, the report added.
For cannabis, there was also "an argument that amending the law relating to the growing of it, at least for personal use, might go some way to undermining the commercialisation of production", the UKDPC said.
The commission called for Parliament "to revisit the level of penalties applied to all drug offences and particularly those concerned with production and supply", but stopped short of calling for the decriminalisation or legalisation of most drugs.
A new approach was also needed because the rapid creation of new drugs was changing the market too quickly for the traditional methods used to control it. "Seeing all drug use as invariably problematic can reduce the cost-effectiveness of policy," the commission said.
"Just like with gambling or eating junk food, there are some moderately selfish or risky behaviours that free societies accept will occur and seek to limit to the least damaging manifestations, rather than to prevent entirely. Taking drugs does not always cause problems, but this is rarely acknowledged by policy makers."
A Home Office spokeswoman said: "While the Government welcomes the UKDPC's contribution to the drugs debate we remain confident that our ambitious approach to tackling drugs - outlined in our Drugs Strategy - is the right one. Drug usage is at it lowest level since records began. Drug treatment completions are increasing and individuals are now significantly better placed to achieve recovery and live their lives free from drugs."