The government subsidizes much of the basic research needed to identify candidate drugs. However, private companies usually pay for the human trials necessary to bring new drugs to market. A stage-3 clinical trial can cost >$1B with no guarantee of success. It's a huge financial risk.

In theory we could nationalize the whole industry, and let government bureaucrats decide which clinical trials to fund. I'm skeptical whether that would produce better results. Government employees with no skin in the game have a poor record of picking winners.