A critical question in planning a response to bioterrorism is how antibiotics and medical supplies should be stockpiled and dispensed. The objective of this work was to evaluate the costs and benefits of alternative strategies for maintaining and dispensing local and regional inventories of antibiotics and medical supplies for responses to anthrax bioterrorism. We modeled the regional and local supply chain for antibiotics and medical supplies as well as local dispensing capacity. We found that mortality was highly dependent on the local dispensing capacity, the number of individuals requiring prophylaxis, adherence to prophylactic antibiotics, and delays in attack detection. For an attack exposing 250,000 people and requiring the prophylaxis of 5 million people, expected mortality fell from 243,000 to 145,000 as the dispensing capacity increased from 14,000 to 420,000 individuals per day. At low dispensing capacities (<14,000 individuals per day), nearly all exposed individuals died, regardless of the rate of adherence to prophylaxis, delays in attack detection, or availability of local inventories. No benefit was achieved by doubling local inventories at low dispensing capacities; however, at higher dispensing capacities, the cost-effectiveness of doubling local inventories fell from 100,000 US dollars to 20,000 US dollars/life year gained as the annual probability of an attack increased from 0.0002 to 0.001. We conclude that because of the reportedly rapid availability of regional inventories, the critical determinant of mortality following anthrax bioterrorism is local dispensing capacity. Bioterrorism preparedness efforts directed at improving local dispensing capacity are required before benefits can be reaped from enhancing local inventories.