Yes. It is correct and natural. It has a rhetorical approach to counter the common statement "There's nothing wrong with (illegal) drugs. In moderation, they are fine like beer and whisky. In excess, they cause problems like beer and whisky." There's nothing wrong with this car except the tires are old. There's nothing wrong with this house except it's expensive. There's nothing wrong with (illegal) drugs except the personal and social damage they cause. There's nothing wrong with (illegal) drugs except they're wrong.

It makes no real sense to me. Only possible way I could interpret would be, "There's nothing wrong in doing drugs except that 'you're not supposed to'. (do drugs)"

Yes, sure it does.... At least for me.