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It means that the dealer is adding a substance to the drug in order to dilute in and make a larger profit on it. For example heroin in the 1980's at the street level was on average about 4% actual heroin. Chances are the longer the chain from the primary supplier to the user, the more diluted the substance will be. Cocaine is usually cut with other white household substances.

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Q: What does it mean when a dealer cuts a drug?
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