It is pronounced "Dee-Rugs"
Rather than merging the D and the Rugs together.
This was first developed to be able to talk about scoring some drugs in a public area, where talk of drugs would be taboo.
This phrase originated in none other than the dirty den of meriden CT.
"Word, I hear that"
Police Officer: "Did I hear you boys talking about rugs?
"Why, yes you did, pee-iggy"
Police Officer: (chuckles) You kids and your slang.