The New York Times reports:

Prices of the most widely used prescription drugs rose sharply in this year's first quarter, just as the new Medicare drug coverage program was going into effect, according to separate studies issued yesterday by two large consumer advocacy groups.

AARP, which represents older Americans, said prices charged by drug makers for brand-name pharmaceuticals jumped 3.9 percent, four times the general inflation rate during the first three months of this year and the largest quarterly price increase in six years.

Price increases for some of the most popular brand-name drugs were much steeper; the sleeping pill Ambien was up 13.3 percent, and the best-selling cholesterol drug, Lipitor, was up 4.7 to 6.5 percent, depending on dosage.

Over all, AARP said, higher prices mean that the cost of providing brand-name drugs to the typical older American, who takes four prescription medicines daily, rose by nearly $240 on average over the 12-month period that ended on March 31.

"When the manufacturers' wholesale prices increase, it gets passed through the system, regardless of who the final purchaser is," said John Rother, the policy director of AARP. Although the drug industry's main trade association challenged the accuracy of the AARP survey, a separate study, by Families USA, a patient advocacy group, found similar inflation rates among brand-name drug prices. While the higher prices have a general impact on the drug-taking public, consumer advocates said the higher prices have special implications for Medicare, which Congress barred from negotiating prices with drug makers when lawmakers devised the new so-called Part D drug program.

Anyone surprised? Since Medicare can't negotiate, why wouldn't drug companies just raise prices? And it isn't about returning costs - the cost of producing the next pill is practically nothing, drug companies spend more money on advertising and marketing than research, and drug companies have the highes average returns of any industry group, even beating out banks. (Which is saying something since over the last few years banks could borrow at near zero rates and then lend the money for real interest. Don't you wish you could borrow from the Fed or the Bank of Japan at the nominal rate?)

Y'know, free markets aren't the answer to everything, but for the free market to solve something it's good at solving, it has to be allowed to, er... be a market. Negotiating is a market mechanism. Copying drugs and making generics is known as "substitution" and is part of how free markets work.

I have a dream. I dream of the day I actually discover a free market operating somewhere in the world. But I doubt, even if I live to 120, I'll ever see it in the drug industry. They're addicted to sucking from the government's tits worse than any mythical welfare queen ever was.