OBJECTIVES: The Medicare Modernization Act explicitly ruled out the possibility that the federal government could directly negotiate drug prices as an effective way to contain costs for Part D. Recent changes in the leadership of congress have led to a reemergence of debate on this issue. Taking a societal perspective, we sought to quantify how much money for prescription drugs could be saved among the elderly if prices nationwide were equivalent to 2006 Federal Supply Schedule (FSS) prices for several of the top selling prescription drug classes. METHODS: Cross-sectional analysis of the nationally representative Medical Expenditure Panel Survey, 2004. Adults > 64 years who filled a prescription for any drug within the following classes were included: Angiotensin Receptor Blockers, ACE inhibitors, HMG-CoA Reductase Inhibitors (Statins), Proton Pump Inhibitors, Non-Steroidal Anti-inflammatory, Histamine-2 Receptor Antagonists, Dihydropyridine Calcium Channel Blockers, and Steroid Inhalers (n= 2,198 individuals). The average price/pill for each drug-dose combination was calculated in 2006 dollars and was compared to prices available through the November 2006 FSS. A savings/pill was calculated to develop a nationally representative estimate of the societal savings that could be achieved if medications could be obtained for FSS prices instead of current pricing systems. RESULTS: Substitution of the FSS price could result in a median annual per person savings in drug expenditures of $308 (interquartile range, $124 to $637) for the Medicare population, age 65 and above. The potential national savings among these 8 classes over one year is $10.7 billion (95% CI $10.0 billion to $11.4 billion). Among Statin medications alone, the annual savings could be $5.9 billion (95% CI $5.4 billion to $6.4 billion) in this age group. CONCLUSION: Substantial savings in drug expenditures, in the tens of billions of dollars, would result if Federal Supply Schedule prices were used by Medicare in place of these commercially available prices.