You absolutely tell the parents. Failing to do so makes you look bad if they find out in another way that you knew all along. Plus, wouldn't you want them to tell you if the situation was reversed? This allows them to parent their child in the way they see fit. If they could care less because they get high with the kid, then that's on them and they probably won't mind you telling them. If they are going to strangle the kid over it, then they will be very interested in knowing. Its not your place to parent another person's kid, but it is your place to give them the tools needed to do it themselves. This other kid has a direct influence on your own child's behavior, and if they are a little shit then its going to make your kid a little shit as well, and you need to know if you need to restrict their time spent together.
After I moved out (and moved 125 miles away) I found out my little sister had sneaked out of the house one night to meet up with her coke dealer boyfriend. So of course I called my mom, and she in turn called the cops on her. My mom had no clue she had been doing that and was very glad I had let her know.