You assume that money is the only reason for people to to develop new medical devices. People could also do so because it helps people. Because the technology is awesome. Any number of other reasons.

There are only limited resources available, including the creativity and time of engineers, and we need a way to allocate them over our (virtually) unlimited needs. If we're not going to use a market to make those sorts of decisions, what should we do?

It may seem heartless to pass over a drug which could 'only' save a few thousand lives, but even if you can't put a dollar price on human life there's still an opportunity cost in other lives which could be saved by using medical resources more effectively. A functioning healthcare market ought to look something like triage; people who gain the most benefit from medical attention will receive prompt and effective service, while some people are unfortunately going to have to be turned away.