When you put a bounty on dead rats, you don't get a reduction in the amount of rats in your town. What you do get is people breeding rats, to turn in for the bounty.
Drug markets will operate with similar incentives.
If you want to kill the drug trade, what the government needs to do is to start selling drugs. When drugs are cheap, violence and interest in the drug trade plummets. Nobody wants to go to jail over their drug dealing 'job', when its earning them $8/hour.
