This is a good question that is difficult to answer.

I think the answer is that drug development is the kind of process which public institutions are particularly ill suited to manage. That isn’t to say it’s impossible, but the chance of messing it up is very high. A public institution simply cannot fund a research process purely based on facts. There are always other political motivations involved, about where the money goes, who gets the money, who is getting too much money etc. A drug company is free to pursue and fund development of drugs based on merit alone.