They were smoking opium. Bootle diggers frequently find small long bottles with small openings and a long narrow interior, and they refer to these as opium bottles. They are not! These may have contained Chinese medicines, but they could not contain opium, which came in a black, sticky, tar-like substance packaged in tins. The tar was then placed in the bowl of an opium pipe and then ignited and smoked. This wiki article provides an illustration.

In our excavations of various sites in Virginia City, Nevada, we found an assortment of "needles", but these weren't what we think of today: they had broad apertures, and to "inject" the drug, one had to open a vein and work the "needle" around while irrigating the opening (while hoping some of the drug would enter the victim's - er, I mean patient's - bloodstream). This wouldn't have been an efficient means to injecting an opiate.

I discuss some of this in my book, Virginia City: Secrets of a Western Past (2012)