The penalties for drug misuse should be relaxed so that possession of small amounts would no longer be a criminal offence, the government has been urged.
The recommendation comes in a report from the UK Drug Policy Commission, which undertook six years of research.
Its detailed report concludes the UK is wasting much of the £3bn it spends each year on tackling illicit drugs.
The Home Office says drug use is falling and it does not plan to alter its approach.
The report, called A Fresh Approach to Drugs, says the annual estimated cost to England and Wales of class A drug use is £15bn.
It says that while drug use and drug problems have declined in the UK in recent years, there are still about 2,000 drug-related deaths each year and 380,000 problem drug users.
Some 42,000 people in England and Wales are sentenced annually for drug possession offences and about 160,000 given cannabis warnings, it says, which "amounts to a lot of time and money for police, prosecution and courts".
The commission says giving people cautions and criminal records for having small quantities is not "proportionate" and suggests imposing civil penalties, such as fines, or drug treatment orders instead.
It also recommends individuals who grow a small number of cannabis plants should be treated leniently, to undermine organised crime networks that produce stronger types of cannabis.
However, it does not call for the decriminalisation or legalisation of most drugs.
"We do not believe that there is sufficient evidence at the moment to support the case for removing criminal penalties for the major production or supply offences of most drugs," it said.
It calls for a review of the Misuse of Drugs Act and drugs classification, which it says has "lost credibility" for many people.
It suggests technical decisions about the classification of individual drugs should be taken by an independent body, with parliamentary oversight.
The report says some key planks of government policy - including major drug seizures - have little or no impact, and some programmes in schools could even have increased the use of drugs.
It says there is "little evidence" that a recent increase in prison sentence lengths for drug production and supply has deterred dealers or affected availability.
It recommends that the main political parties should establish a cross-party forum to agree on how drug problems can be addressed "in a cost-effective and evidence-based way".
114 new drugs
Dame Ruth Runciman, the charity's chairman, said: "Over the last three decades, UK governments have done much to reduce the damage caused by drug problems.
"Needle exchanges have reduced HIV among injecting drug users to one of the lowest rates in the world. The investment in treatment for people addicted to drugs has also helped many to rebuild their lives.
"Those programmes are supported by evidence, but much of the rest of drug policy does not have an adequate evidence base.
"We spend billions of pounds every year without being sure of what difference much of it makes."
The commission also said a new approach was needed because the rapid creation of new drugs was changing the market too quickly for the traditional methods used to control it.
It says that, between 2009 and 2011, 114 new psychoactive drugs were identified in the European Union.
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.
"I want to take this opportunity to thank the UKDPC for its work in this area over the past six years."