yes, capitalism creates the conditions for that collusion.

Focus on what capitalism means when you say this, and focus on the context you’re saying this in. Capitalism is the private ownership of the means of production, and we are discussing medicine. So, what you’re saying, is that the private control of medicine created the conditions for government collusion with a public corporation, This does not make sense, because public corporations are not private. This is corporatism, not capitalism.

removing the government doesn’t reduce that corruption

Then it’s the governments job to allow private entities some avenue to produce medicine. They can do so by not enforcing patents on helpful medicine that empowers corporations.