I'll also add that the educational institute who received the government funds out-licenses the drug while maintaining a royalty interest in it. Lyrica came out of Northwestern and they build a brand new, shiny chemistry building out of the royalties.
Why is that bad? Shouldn't the discoverers of pregabalin, who helped millions in excruciating incurable chronic pain, receive a portion of the profit from the sales of the drug to build facilities for future research?
That seems like a well-formed feedback loop to me.
I'm not saying it's bad at all! I'm just pointing out that the academics who invent something and pass it to a biotech company for development get something in return!
Cynically, even if the school gets 100% of the profits, the feedback loop of "encourage drug development, get paid" functions properly. They would only have to pay their researchers just enough to continue working...