BACKGROUND: We hypothesize that the location of highly segregated Hispanic and in particular Puerto Rican neighborhoods can explain how Colombian-sourced heroin, which is associated with a large-scale decade long decline in heroin price and increase in purity, was able to enter and proliferate in the US. METHODS: Our multidisciplinary analysis quantitatively operationalizes participant-observation ethnographic hypotheses informed by social science theory addressing complex political economic, historical, cultural and social processes. First, we ethnographically document the intersection of structural forces shaping Philadelphia's hypersegregated Puerto Rican community as a regional epicenter of the US heroin market. Second, we estimate the relationship between segregation and: (a) the entry of Colombian heroin into the US, and (b) the retail price per pure gram of heroin in 21 Metropolitan Statistical Areas. RESULTS: Ethnographic evidence documents how poverty, historically-patterned antagonistic race relations, an interstitial socio-cultural political and geographic linkage to both Caribbean drug trafficking routes and the United States and kinship solidarities combine to position poor Puerto Rican neighborhoods as commercial distribution centers for high quality, low cost Colombian heroin. Quantitative analysis shows that heroin markets in cities with highly segregated Puerto Rican communities were more quickly saturated with Colombian-sourced heroin. The level of Hispanic segregation (specifically in cities with a high level of Puerto Rican segregation) had a significant negative association with heroin price from 1990 to 2000. By contrast, there is no correlation between African-American segregation and Colombian-sourced heroin prevalence or price. CONCLUSION: Our iterative mixed methods dialogue allows for the development and testing of complex social science hypotheses and reduces the limitations specific to each method used in isolation. We build on prior research that assumes geographic proximity to source countries is the most important factor in determining illicit drug prices and purity, while we find more complex, potentially modifiable determinants of geographic variation in retail drug markets. We show that specific patterns of ethnic segregation, racism, poverty and the political economy of socio-cultural survival strategies combined to facilitate the entry of pure, inexpensive Colombian-sourced heroin.