Are state drug policies associated with variation in opioid misuse, opioid use disorder and drug overdose mortality? In this serial cross-sectional study of state-level drug overdose mortality data and claims data from 29 million commercially-insured patients in the US between 2007 and 2018, state policies were associated with reduction in known indicators of prescription opioid misuse as well as overdose deaths due to prescription opioids. However, policies were also associated with increases in diagnosis of opioid use disorder and overdose as well as drug overdose mortality from illicit substances. Although existing policies are associated with reduced misuse of prescription opioids, they may have the unintended consequence of driving those with opioid use disorders to the illicit drug market and to alternative substances, inducing higher overdose mortality.