I am not sure you are aware of the immense costs to develop new drugs for diseases. At least that’s what your comment sounds like, making new drugs. To do that as a state entity is completely unrealistic as it would take a massive investment from the government. Most drugs developed also fail at some stage of the process, meaning you lost all that money and work on it.
Now, if you meant that the government should produce already established basic drugs that are known to work, sell those at cost, yes, that would be a very sensible approach.