States "Drug-induced dreams reduced by 50%" (7)

I believe the answer is:

nations

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'states drug' is the definition.
'nations' can be an answer for 'states' (I've seen this in another clue). I'm unsure of the 'drug' bit.

'induced dreams reduced by 50%' is the wordplay.
'induced' becomes 'na' (I am not sure about this - if you are sure you should give a lot more credence to this answer).
'dreams' becomes 'emulations' (emulation is a kind of dream).
'reduced by 50%' suggests halving the letters.
'emulations' with half the letters taken is 'tions'.
'na'+'tions'='NATIONS'

Can you help me to learn more?

(Other definitions for nations that I've seen before include "Countries" , "No stain (anag.)" .)

I've seen this clue in The Independent.

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