There are almost always alternative ways forward when an existing market structure stops working. For instance, maybe drug development needs to be more bazaar and less cathedral? More open source, more distributed, less decentralized?
Of course, existing laws probably make it illegal in the US to work in this area at all if you aren't one of the hand-picked big names (i.e. cathedrals).
That is sort of the knee-jerk reaction I'd expect from the startup world. It has been tried. For that matter the "healing technology" community has departed somewhat from small-molecules into using more technology or biologicals.
It doesn't solve the problems all that much though. For one thing, clinical trials still are expensive and can't usually be scaled down, partly for regulatory issues but also because it's sort of frowned upon to take wild risks with the health of humans (or animals for that matter).
On the other hand the failure rate still persists. If a dozen startups invest several millions each befor failing a few years down the road, the capital still has to come from somewhere, and the experience and institutional knowledge of pharmaceutical industry can't easily be transferred to these small startups anyway.
Maybe one way forward would be more medium-sized companies instead of a few larger ones. (But as an outsider, maybe I'm mischaracterizing the situation.)
As for expensive clinical trials---I bet nobody has tried crowdfunding them. Surely that would be illegal, but I think crowdfunding has the potential, today, to be what the joint stock company was at the dawn of global trade (e.g. the Virginia Company and the like).
Of course, existing laws probably make it illegal in the US to work in this area at all if you aren't one of the hand-picked big names (i.e. cathedrals).