I would just say that needles are used for giving medicine. They need to go in special bins so that they don't make other people sick. Getting *****ed by a needle can make you very sick so please don't ever do it. Come and tell me straight away so I can make sure it goes in a proper bin. On drugs you could say: People sometimes take the wrong medicine because they think it will make them feel better but it makes them sicker. Sometimes this means that they don't put the needles in the special bins like they are supposed to.

I have a 5 yo and I think he would understand all of that. HTH