There's less incentive to work on PROFITABLE drugs and work on IMPORTANT drugs. (Think cures for cancer instead of Viagra.)
And that's what Pharmas spend the most R&D money on: oncology drugs. After that it's CNS (neurodegenerative diseases like Alzheimers), and then cardiovascular. Which is what viagra was originally being developed for: cardiovascular problems like angina and hypertension.
As to unreasonable profits: What rate of return would convince you to put your money in an investment if you knew it was going to be 10 years before you received the first dollar back - and there was a 90%+ chance of failure to boot?
If Company B cures the disease, then Company B gets paid until nobody has the disease then Company B has to invent a new cure or go out of business.
At that point company B has made more money than all of the treatment manufacturers were making combined. It set a high price for its cure, everyone bought the cure. If the disease was Diabetes, they grossed 2 trillion dollars, easy. At that point B could just buy Google or a medium size country if they still felt like they needed something to do.
Drug A, a cure. Drug B, treatment Time til profit: Since it offers benefits far above a treatment, the cure gets gets a breakthrough therapy designation and accelerated approval from the FDA review panel, leading it to be approved months or years earlier than the treatment. Once in the market, the cure earns all of its revenue FAST. Everyone takes it as soon as they can get it. The treatment takes longer to approve, slowly pulls in market share, and slowly earns revenue over a decade until generic competition kills the margin. Competition: A cure for diabetes would displace all existing treatments as fast as it could be manufactured. It wouldn't even face competition from "me too" cures - by the time they came out every existing diabetic with insurance has already been cured, so you're only fighting over new cases. A treatment would face stiff competition from all of the existing drugs - and thus have huge marketing costs. The situation would only get worse as "me too" therapies showed up a few years later. And marketing costs for the cure would be limiting to hitting "send" on the press releases. Price: Insurance companies wouldn't compare the cost of a cure to the cost of a decade of diabetes drugs, they would compare it to the cost of a decade of diabetes care: hospitalizations, diagnostics, office visits, everything. A pharma could price a cure at $100K and insurance companies would actually save money.
Basically, A good new Diabetes treatment would make a shit ton of money. But by the time it made it to market a cure would have already made its manufacturer the richest company in the world, and probably over 2 trillion dollars in revenue ($25k per dose x 50 million diabetics in the US and the EU) within 5 years.
And why are we eschewing or overlooking treatments—real, honest-to-god treatments—that can let patients lead longer, more normal lives?
They take a pretty narrow view of "we". Once you get past the basic science phase of identifying the cause, the vast majority of funding and FTEs goes to researching treatments. Even though cures would be much more profitable for most diseases, it is very rare for cures to be attainable.
Life is a healthy respect for mother nature laced with greed.