The exchanges are an awkward use of government funds: they appear to condone an activity that is both illegal and regard by some members of society as immoral. Yet exchanges plausibly save lives of drug users and others by reducing the spread of disease.
As further illustration of the policy dilemmas created by needle exchanges, consider this:
A bill working its way through Congress would lift a ban of more than 20 years on using federal money for needle exchange programs. But the bill would also ban federally financed exchanges from being within 1,000 feet of a school, park, library, college, video arcade or any place children might gather — a provision that would apply to a majority of the country’s approximately 200 exchanges.
So what's the resolution? A small step is to legalize syringes in those states that currently ban them. No evidence suggests that drug use is higher due to legal availability of syringes.
The better step is to legalize drugs. That would mean significantly cheaper drugs, so the incentive to inject - which provides a big bang for the buck - would diminish substantially. For users who still wanted to inject, a legalized market would provide drugs packaged with disposable syringes, thereby minimizing any incentive to share needles.