Despite continuing efforts by Egil Krogh and his young staff on the Domestic Council and increasing pressures from their superiors in the White House for "dramatic results," the embryonic war on drugs soon dissolved into open bureaucratic strife. There were no fewer than fifteen different federal agencies, with different programs, involved in the government offensive against drugs, and each tended to view the problem from the perspective of its own particular programs and interests. By early 1971 Krogh found that the administration's entire effort was leaking like a sieve, with the various agencies releasing to congressional subcommittees and the press, information which advanced their own programmatic interests and undermined those of competing agencies. In this morass of conflicting claims and statistics it became impossible for the White House to sustain its initiative for long.

For example, after the Bureau of Customs succeeded in obtaining tens of millions of dollars' worth of new airplanes and patrol equipment on the assumption that much of the narcotics in America came from Mexico, and could therefore be intercepted by intensified border surveillance, the Bureau of Narcotics and Dangerous Drugs released information to Congress and the press which suggested that Turkey, not Mexico, was the crucial source of supply. When the White House then succeeded in pressing the State Department into action against the Turkish poppy fields, the CIA released its "survey," which showed that Turkey produced only a small fraction of the world's illicit opium, and that if this supply were curtailed, it would rapidly be replaced through other countries in Asia and the Middle East. In another case John Ingersoll had hired systems analysts to demonstrate to the public that there were nine primary systems of narcotics distribution in the United States. When the BNDD was focusing almost all its efforts on these nine systems rather than on the small trafficker, Eugene Rossides and the Bureau of Customs found a tenth system, unlisted by the BNDD in its charts. More embarrassingly, it was the largest single supplier of heroin to United States markets.

Nixon called Ingersoll and Krogh to his office to clarify the situation, and after Ingersoll presented a number of bar graphs depicting the increased value of seizures of narcotics through this systems approach, Krogh recalled that the president responded, "Now this is very impressive, but does it have anything to do with solving the problem of narcotics ... are there less narcotics on the street? Are there fewer addicts? Is there less crime related to the use of narcotics? Can you show me that the problem itself is being corrected by these operational indices of success?" Since Ingersoll could not specify the number of addicts in the United States, or the total amount of heroin that was consumed, Nixon realized that there was no way of knowing what proportion of the heroin traffic passed through the nine systems that Ingersoll was concentrating his forces on. Even Rossides readily admitted to anyone who asked that less than one fifth of all narcotics shipped into the United States was intercepted before it reached its ultimate customers. At one point, when Ehrlichman brought him a report on bureaucratic charges and countercharges, the president shook his head in dismay and asked, "Why are they fighting each other ... instead of drug traffickers?" Yet the continuing conflicts between the law-enforcement agencies involved in the war on drugs were relatively minor compared to the "bureaucratic in-fighting," as Krogh put it, among the nine agencies involved with the problem of treating narcotics addicts—and thereby reducing demand.

The federal government had first become involved in the treatment of addicts in 1929, when Congress established facilities at Lexington, Kentucky, and Fort Worth, Texas, to treat the large number of imprisoned addicts in federal penitentiaries and to provide an alternative to the private clinics that had recently been outlawed by the federal government. These "narcotic farms," as they were called, detoxified addicts by gradually reducing their daily dosages of heroin until they were completely withdrawn from the drug under the supervision of government-employed psychiatrists. Detoxification proved unsuccessful in permanently changing the behavior of those who underwent the treatment—more than 70 percent of those who were committed to the government's narcotic farms eventually resumed the use of heroin. It was debatable whether this resumption was due to the environment to which they returned or to the chemical lure of the drug itself. In any case, detoxification became the central focus for government research and data collection on narcotics addiction. By the time the Nixon administration assumed office, the National Institute of Mental Health (NIMH), which administered the "farms" and employed the psychiatrists engaged in the detoxification programs, had developed a "bureaucratic interest in maintaining the status quo," as Egil Krogh explained the situation. Despite White House pressures, NIMH resisted the idea of using treatment as part of the law-and-order campaign which focused on the ghetto population. It claimed that this was because the methods of treatment were untried and possibly unsafe. Krogh, however, saw this as a bureaucratic problem. He explained in a memorandum to John Ehrlichman that the "primary orientation of NIMH is towards professionals and psychiatrists not other approaches; the Institute's target populations have historically been non-poor; ... philosophically, NIMH orientation could not accommodate non-mental health approaches...." In September, 1970, the president himself became concerned over the "independence" of NIMH, when its director, Bertram Brown, was quoted by the Washington Post as recommending that marijuana violations be treated no more seriously than traffic violations and that offenders simply be given a ticket. Since this conflicted directly with the administration's bête-noire strategy, to appear merciless and unrelenting in prosecuting crimes, Krogh recalled, "The president hit the ceiling." He even wrote Krogh a personal note suggesting "that clown Brown" be fired immediately, and then angrily reiterated this demand in a meeting a few days later with Ehrlichman, Krogh, and Krogh's assistant, Jeffrey Donfeld. According to Donfeld, Krogh then asked him to prepare a memorandum for the president which would provide "evidence of incompetency." Donfeld investigated and found that Brown was a close friend of Elliot Richardson's, and that Richardson would not be easily persuaded to fire Brown to please the White House. Realizing that Richardson was not a man to be trifled with, the president ordered the matter dropped. And by December, 1970, as Krogh and Donfeld watched in complete frustration, Bertram • Brown managed to gain effective control over an interagency study group which was supposed to promulgate national goals for the war on drugs. Brown steered the group into recommending that his agency, NIMH, take the lead in government efforts to reduce addiction. To counter these recommendations, Krogh immediately set up another study group of experts not in the government.

The administration was also having problems with the Department of Health, Education, and Welfare, which through a number of its other agencies was funding treatment programs throughout the United States. Secretary Richardson took the position that the criterion for allocating funds to programs should be the "size of the local drug problem." Although this may have seemed like a rational way of allocating federal money to the neediest areas, it would mean that New York City, which then had approximately half of the drug addicts in the nation, and Chicago, which also had a large addiction problem, would receive most of the federal money. In political terms, H. R. Haldeman pointed out, reaching two cities that were "Democratic strongholds" was "unacceptable." Donfeld reminded Krogh of this consideration in a May 17, 1971, memorandum criticizing the submission of drug-abuse "initiatives" from the Health, Education, and Welfare Department. In the section on "Selection of Recipient Cities," Donfeld noted, "If 'size of the local drug problem' is a key criteria for funding, then most of the money will be poured down the insatiable holes of New York and Chicago with no likely visible reduction in crime. Let's dream up a non-formula where some political mileage can result from visibly achieving a reduction in crime." On the other hand, two agencies created by Lyndon B. Johnson in his war on poverty, the Model Cities Administration in the Department of Housing and Urban Development (HUD) and the Office of Economic Opportunity (0E0), wanted a large part of the "drug money" invested in counselors and other jobs in the ghettos which would be administered by their agencies. The White House staff feared that such money would not go for treating addiction or reducing the crime problem in the inner city but for hiring more organizers in the poverty agencies who would ultimately work against the interests of the Nixon administration. Adding to the confusion, NIMH proposed that "community mental health centers be the focal point for drug rehabilitation projects." The White House staff viewed this as simply an attempt by NIMH to expand its empire, and commented in a memorandum, "Community Mental Health Centers are brick buildings in primarily middle class neighborhoods ... how many young blacks now go to psychiatrists or would want to go to mental health centers for their addiction?" The staff warned that such a program would strengthen the NIMH dynasty to the detriment of the administration's law-and-order programs. (NIMH was also muddying the waters by releasing multibillion-dollar estimates of the amount of crime being committed by drug addicts; and the Domestic Council, according to a staff report authored by Krogh and Donfeld, attributed these exaggerated figures to NIMH's "desire to evidence [al need for treatment programs, thereby aggrandizing their territory.")

There was also "a growing White House concern with coordinating treatment programs for soldiers returning from Vietnam," according to Krogh. In the summer of 1970, both Egil Krogh and John Ehrlichman visited Vietnam and discovered that it was an open secret that a large number of American servicemen in Saigon were using heroin. The Department of Defense, however, refused to accept Krogh and Ehrlichman's findings and claimed that there were "only a few dozen" confirmed cases of heroin addiction in the Army. Meanwhile, Krogh found out that congressional investigators in South Vietnam were being told by unit commanders that between 10 and 15 percent of all U.S. troops in South Vietnam were addicted. The specter of several hundred thousand addicts returning from Vietnam convinced the president that the federal government would have vastly to expand its treatment facilities. At one point Krogh suggested that funds could be provided to the Veterans Administration to allow it to expand its treatment facilities for returning soldiers. The president, demonstrating some insight into the escalating nature of bureaucracies, decided against building new "Veterans Administration capacity to handle heroin addicts because once they are built, one can never get rid of that capacity," according to a memorandum of the conversation. (Such memoranda were assigned to what was known as the President's File.) Since there seemed no other way out of the bureaucratic tangle, the president agreed with Krogh and his staff that the only answer was to "reorganize into a central agency the separate efforts of the nine federal agencies dealing in these areas...." Krogh later explained, "We felt we couldn't get control of policy unless we put it all together."

The idea of placing all the federal treatment and rehabilitation programs for narcotics addicts under the umbrella of a single agency was first proposed in 1970 by the President's Advisory Council on Executive Organization, which was headed by Roy L. Ash. The Ash Council, as it was known in the government, suggested that this new umbrella agency be created within the Department of Health, Education, and Welfare. It became clear, however, in early 1971 that this new agency would, if located in HEW, fall under the influence of Bertram Brown's NIMH rather than that of the White House. Since hundreds of millions of dollars were to be channeled into selective cities and programs by this new agency, and it was hoped that such treatment might bring about dramatic results before the 1972 election, Ehrlichman decided that the new umbrella agency should be under the direct control of the White House. "There was a strong feeling that it should span everything, be accountable to the president and be in the president's office," Krogh later stated. Thus, in the spring of 1971, President Nixon approved plans to create a special-action office which would allow the White House staff radically to revamp all the government's narcotics treatment programs and use them for novel purposes.