I don't know what kind of fantasy world you are living in but there are plenty of governments and charities who fund scientific and medical research without the goal of profit.
While government has an okay track record funding research, they have a pretty poor track record funding development, hence why it is left to private companies. This has to do with the way governments legally structure funding combined with the fact that development cycles are much longer than political cycles. In areas where the government does fund development, the development is interrupted by constantly shifting funding priorities and politicians trying to redirect money to their districts or constituents in the middle of development. This tends to make things cost (at least) twice as much and take (at least) twice as long as they would in environments where the development cycle is guaranteed to be uninterrupted and free from the whims of whoever is elected this year.
The research they are doing is generally not in the final phase of actual development of the drug which is where it gets incredibly expensive.
The interesting thing is that, from: http://www.techdirt.com/articles/20070927/012604.shtml
>A recent GAO study found this to be a worrisome trend, noting that fewer new innovative drugs are being created -- with pharma firms instead focusing on ways to extend the patent protection on existing products by pulling a few tricks (such as "reinventing" Claritan as Clarinex just to get more patent coverage).
In other words, government funded or not, patents are stifling medical innovation.