That myth is busted:
The authors of the song repeatedly rejected this interpretation and have strongly and consistently denied that they intended any references to drug use.[12] Both Lipton and Yarrow had stated, "'Puff, the Magic Dragon' is not about drugs."[13] Yarrow frequently explained that the song is about the hardships of growing older and has no relationship to drug-taking.[14][15] He also said that the song has "never had any meaning other than the obvious one" and is about the "loss of innocence in children."[16] He dismissed the suggestion of it being associated with drugs as "sloppy research".[17]