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Err, well, no — a competitive free market will ensure that prices are driven down. What I think you are trying to get at is that healthcare, generally, doesn't function in a capitalist market, and I would agree. The reason healthcare doesn't function well under capitalism is because purchases are made under a leonine contract.
This is the same sort of issue as mentioned above, but for somewhat different reasons — public utilities are intrinsic monopolies, which are inherently anti-competitive.
It is good under the exact restricitions that you initially described. As soon as you deviate from those restrictions, it breaks down.