Profit is a very strong incentive, and it also allows customers to have a vote in what gets researched. I'm not convinced that a more centralized research system delivers at the same level, especially in the long run. It's hard to judge, of course, because we can't run perfect simulations and e.g. look at the monopolies in telecommunication and compare them with a market in the same time and under similar circumstances, but it suggests that monopolies aren't that helpful to R&D. You could argue that the universities would compete, but either funding would be based on output (in which case the universities would just replace the pharma companies), or it wouldn't be (in which case they wouldn't really compete).

I'm not a huge fan of the pharma industry, but I'm not convinced a system that doesn't incentivize research success can deliver the same.