Waaay back in Season one when Officer Friendly kicked Merle's ass and handcuffed him to the roof, he went through his pockets and pulled out a packet of white powder and tossed it over the side. Also when T-Dog brilliantly sliced himself up in season 2, Daryl had the antibiotics strong enough to help him gotten from "Merle's Stash" Implying he had a small pharmacy in his bike saddlebag.(At one point they even showed him rifling through a clear bag filled with pill bottles)
He was pretty whacked out on something on the roof, and I don't think it was crushed up antibiotics.
Not to mention, Merle himself told Andrea how the Governor found him just this season, the only reason he is clean now is because he ran out of drugs.