Buckshot, they have made profits with those drugs for years. Perfectly good ones. The problem is that they want to make obscene ones. Most of those old drugs cost almost nothing to make. They work just fine. They can be sold for a tidy profit. But the same resources can be used to make some really expensive drug instead, that may not treat the same thing, or may treat the same thing, but no better, or even not as well. But the shareholders want more money and the executives want higher salaries. So, out with the old, in with the new! Up with the prices!
Look, I understand the free market idea, and I also understand that its their equipment. And, part of the problem is that regulation makes it hard for someone else to step in and just start making the old drugs in their own facility (i.e. answering market need). Of course, there's also the problem that the drug companies have merged so many times that there aren't many left . . .
However, and this is where we will differ, there is also such a thing as greed. Plain, cold-blooded, immoral, greed. Greed that says that the profit we make from making a cheap effective drug everyone can afford is not enough, and we need to make an expensive new drug instead so we can make really BIG profits. (There's an immense amount of evidence that the drug companies focus on developing "blockbuster" drugs and "me too" drugs that we don't really need, while totally ignoring drugs we don't) MEanwhile, we'll take the old drug off the market, and push the new drug on doctors, telling them its the new wonder drug, when, um, actually, it isn't. Insurance will pay for it (rates will go up), the government will pay for it for medicare and medicaid (ripping off the taxpayer), and then people who don't have insurance (or lost theirs because they can't afford it anymore) can't buy the cheap drug, and can't afford the new one, but screw them, because we are making lots of MONEY!!
I think the corporate model is the best way to make money and create value that the world has ever seen. I think the free market is, if nothing else, the best system we've seen yet. However, I also believe in market failure, and I believe that corporations will do whatever makes them the most money, which is fine, until ordinary people get caught in the crossfire. When people are denied cheap, effective, proven medication because a company can make more money selling new, expensive medication that may or may not work as well, and thus their lives and health are effected, then society shouldn't just shrug it off.
Now, as to what the government should do . . . actually my first thought is to loosen regulations to allow a bunch of small companies to enter drug manufacuring for generics. My next thought is to loosen import regulations (though with strict quality controls). My next thought is to trust-bust the drug companies. Then come the bailouts and subsidies.