it would make both high-risk and low-risk drug development more profitable, and companies would still choose low-risk drug development.
Why would it make low-risk drug development more profitable? I'm assuming you mean the minor variants when you refer to low-risk drugs. Currently they get the full patent period for minor variants, since they are already authorized to sell them. This makes minor variants ridiculously more profitable than new drugs. Under my system, the minor variants get a much shorter patent period while the original drug gets a longer patent period. Well, a longer sales period.
Note: it's interesting that the original post describes the opposite problem (at least in wording). The article is about high-risk drugs being favored over low-risk drugs. This is because high-risk drugs succeed or fail quickly. Low-risk drugs take longer to test. Therefore the system is biased towards dangerous drugs. I'm guessing that you meant business risk rather than medical risk, as otherwise, your post makes no sense to me.
I'm also unclear as to why "socialized costs for prescription drugs" causes minor variants to be favored over new drugs. Yes, it causes new drugs (both variants and original drugs) to be less expensive to the user than they otherwise would be. It discourages doctors from making a trade off between cost and efficacy. But looking purely at the variant/original issue, I don't see how it matters. This is not to say that I don't agree with making prescription drugs bought by end users. I like that idea, although I suspect that it would be politically unpalatable.
Now if you want to raise a new issue of new drugs being encouraged in areas where there are already perfectly good old drugs, then that's a separate issue. My suggestion won't help with that, as it's completely orthogonal to that issue. It's not intended as a cure all. It's focused on two problems: the favoring of minor variants over original testing and the corporate disincentive to test fully.
It's possible that the FDA's standards are arbitrary and could be relaxed, but even if they are, it doesn't solve the problem. Currently, if a company finds a problem in testing, they are highly incented to avoid doing additional testing to explore the problem. Additional testing both increases their costs and reduces their revenue. Under my system, it would only increase their costs and potentially reduce their liability costs. Revenue would be unaffected (although delayed). This might even help with arbitrary FDA rules, as I expect some of them exist to cover over the disincentive for companies to extend testing.