It's that last step - 5 - which I think is a missing piece of the discussion. A lot of private company pharma and medical research is often doing the 'last mile' work that started in university research programs. Stuff that looks promising is picked up and commercialized, but there's usually significant work the research people have done before big commercial players take it to market. They're not doing all their research from scratch - they're taking the best bits funded by our government research programs and bringing them to market. Cutting university research will damage the private sector pretty quickly.
It even goes beyond the concrete research that eventually gets commercialized. One pharma startup I am familiar with has much of its research-related leadership and board staffed with very successful current or former academic researchers who used to run their own labs or even departments. We cannot shift skill acquisition like that over night to private industry.
