The above patent in the OP is egregious, and I can't really support it.
To your point, innovation may happen, but the inventor may not get compensated along the way. Patents try to bridge the gap. They are not perfect, but they do seem to work, in my opinion.
1. I'm more inclined to judge a policy by the net benefits to society rather than specific participants in it.
2. I actually think the patent system favors large enterprise more often than it does small companies. For a number of reasons. One of them being so much is patented you need a large portfolio of covering things your competitors are probably infringing on as a deterrent from them suing you or counter attack if they do. etc. As a small player, you can't do this.
Your example is perhaps one of how the system was envisaged to work - though I'd be interested to know how you go if ever you needed to finance legal proceedings against a big corporate.
Drug research should be publicly funded and the results given away to all. Not just because it the right thing to do, but because it is the most efficient.