ALI MOORE, PRESENTER: In Russia, the scale of illegal drug use is staggering.

The country has an estimated two million addicts.

Now it's facing an insidious new threat - it is a homemade drug users call krokodil.

It's cheaper than heroin and more addictive, and it's taking a terrible toll in Russia's vast regions.

Moscow correspondent Norman Hermant sent this report for Lateline. And a warning: the story contains some disturbing images.

NORMAN HERMANT, REPORTER: For Ivan, life in the industrial city of Tolyatti has been stripped to its bare essentials: making a cheap and deadly drug by adding an acid to spark a reaction; by grinding phosphorus into a fine powder, and heating: by carefully pouring and measuring. He knows this process very well. He often does little else.

IVAN, KROKODIL ADDICT (translated): Sometimes I might do this five times a day, sometimes only once.

NORMAN HERMANT: Ivan is cooking a drug called desomorphine, better known in these parts as "crocodile", or "krokodil" in Russian.

A visit to the local tuberculosis ward gives a glimpse of krokodil's devastating impact. More than 30 per cent of the patients here are HIV positive, most due to injecting krokodil with contaminated needles.

Both Oksana and Irina are addicts, and Irina in particular bears the gruesome marks of krokodil's damage to human flesh. When it's injected, krokodil eats away at the skin, creating a scaly surface and inspiring the drug's name.

"Horror and disgust," she says, when asked about her reaction. "I detest myself." She has been an addict for two years, and tuberculosis is just one of several krokodil-related medical problems.

IRINA, KROKODIL ADDICT (translated): It acts like a catalyst for all internal diseases. If you have bad lungs, it makes them worse. If it's your liver, then it's your liver that's affected. It eats you up from the inside.

NORMAN HERMANT: Oksana starting doing the drug four years ago, and lost her right eye due to complications from HIV. "At least she is still alive," she says. Many of her friends aren't.

OKSANA, KROKODIL ADDICT (translated): You see that and you think, "I'll be next." It was a shock to find myself in this situation, and I still haven't got out of it.

NORMAN HERMANT: Tolyatti is a sprawling, grim city of 700,000 people near the Ural Mountains. This is the home of Lada cars.

The brand's owner, AvtoVAZ, still employs 70,000 workers here, but tens of thousands of jobs have been cut and poverty is everywhere.

Tanya Kochetkova is a social worker who has watched the toll krokodil has taken on this city, and on thousands of addicts.

TANYA KOCHETKOVA, SOCIAL WORKER (translated): A desomorphine-addicted person is totally consumed by the process of cooking the drug. It's completely different to heroin, which you can take in a couple of minutes and then leave.

NORMAN HERMANT: Ivan is an example of the endless cycle. After 30 minutes of cooking, the components - including iodine, and even petrol - emerge as a drug.

Like many addicts, he avoids injecting in his arms to try to conceal his drug use. He chooses a more discreet location. He will experience a high lasting from 30 to 90 minutes, then the process will start again.

IVAN (translated): I would like to quit. I wish we had the drug replacement therapy like in other countries.

NORMAN HERMANT: A big part of the attraction of the drug Ivan has just made is price. In this part of Russia, a hit of heroin can cost up to $100.

Krokodil is prepared for one tenth of the cost, and the main ingredient is codeine from headache pills obtained from pharmacies. In all, a batch - like the one Ivan just made - can be had for about $10.

The colonel who heads the federal anti-drug service in the region admits krokodil is a scourge - not just here, but all over Russia. His department hands out videos of officers intercepting cars trafficking the drug, and images of addicts that have been arrested with graphic evidence of the damage krokodil can do. But the drug continues to spread.

EVGENIY BERYOZKIN, FEDERAL ANTI-DRUG SERVICE (translated): It's a cheap drug with pretty much the same effect as heroin, but at a much lower price. That's why krokodil is becoming more and more popular.

NORMAN HERMANT: At the local drug treatment clinic they are overwhelmed. Russia has an estimated two million drug addicts, and it's believed 100,000 or more are on homemade drugs like krokodil. Doctors say it's tougher to quit and it's quicker to kill.

SERGEI MIKHAILOV, TOLYATTI DRUG TREATMENT CENTRE: The problem is that the addicts are going downhill much faster. Heroin addicts can last from five to seven years. With desomorphine it's two to four years, no more.

NORMAN HERMANT: Olga Kosova's son was one of krokodil's early victims. Home from the army with no job and few prospects, he became an addict.

OLGA KOSOVA, MOTHER OF KROKODIL VICTIM (translated): I still cry every day. I miss him.

NORMAN HERMANT: She watched her son die at home. She says the hospital turned him away, telling her treating him would have been a waste of time.

OLGA KOSOVA (translated): It's impossible to help them. What good are tears or prayers? There is no remedy against this.

NORMAN HERMANT: Back at the drug clinic, Alexander hopes he won't suffer the same fate. He bears the marks of an addiction that, so far, he cannot beat.

ALEXANDER, KROKODIL ADDICT (translated): My life has been turned upside down. Once I learnt how to do it myself, I couldn't stop. It took all my strength to come here to the clinic. It's so hard to stop.

NORMAN HERMANT: In this hidden krokodil epidemic, in cities across Russia, there are many like him.