A think-tank has called on the government to re-examine its decision to test offenders for drugs after arrest.
In a report published on Monday, the UK Drug Policy Commission (UKDPC) warned that the policy is "inefficient and could be harmful".
The study said it was targeting "less problematic" drug users and raised concerns that drug treatments in jails "frequently fall short of even minimum standards".
UKDPC chairman Ruth Runciman said: "Two striking findings emerge from our review.
"First, community sentences are likely to be more beneficial than short prison sentences for the treatment and rehabilitation of problem drug-using offenders.
"Second, despite some welcome improvements and an increase in investment, the standard of healthcare and support for prisoners with drug problems falls well below acceptable minimum standards in too many prisons."
Justice minister David Hanson said that drug treatment had "a critical role to play in reducing harm to the community through a reduction in drug-related re-offending and in reducing harms to individuals".
"The report recognises the challenges facing the criminal justice system in addressing the problems caused by drug-misusers, the difficulty in treating a chronic relapsing condition and acknowledges improvements made in recent years, including significant increases in resources for drug treatment leading to increased numbers being treated," he added.
Hanson pointed out that primary care trusts were given control over funding for health services in 2006, and said that the "integrated drug treatment system" could "improve clinical care".
He said that 53 prisons will receive health funding for "enhanced clinical drug services" from April, with a further 36 likely to implement the system in 2008/09.
Reform
However, the Conservatives said that fundamental prison reform was needed to tackle drug abuse.
"Treatment is hampered by overcrowding, there are too few abstinence-based programmes, and some inmates are actually getting on drugs in prison," said shadow justice secretary Nick Herbert.
"The widespread availability of drugs in prisons must be tackled, better treatment programmes are needed, and there should be more support for short-term offenders on their release."
Criticising "the inadequacy of current prison regimes", he said community sentences were not "an acceptable alternative" and pointed out that 80 per cent of offenders given a drug treatment and testing order were reconvicted within two years.
Liberal Democrat justice spokesman David Howarth said the report "highlights the load imposed by drug users on our over-burdened penal system".
"Instead of sending ever-increasing numbers of people to prison, the government should focus on ordering drug treatment for non-serious offenders," he said.
"For these offenders, effective drug treatment outside prison will have a far greater impact on reducing future crime than short-term prison sentences.
"This reports adds to the growing evidence that effective community sentences are of far greater benefit to society than revolving-door custodial sentences."
