To my view, the best way for the government to support the development of new drugs is through long-term contracts (10-12 years), which would be awarded through competitive bids for research in specific areas, like cancer or heart disease. The plan would be that the contracts would be relatively large, with the idea that the winners would be comparable to prime contractors for the military. (I describe this system in somewhat more detail in chapter 5 of Rigged [it’s free].)
Major military contractors, like Lockheed or Boeing, typically contract out to many smaller companies in specific areas. This is a good model. Most of the major innovations in the development of new drugs have come from start-ups, who are often bought out by major pharmaceutical companies like Pfizer or Merck. The winners of prime contracts under this system would be foolish not to look to award contracts to innovative start-ups, to ensure that they have something to show for their work.
One condition that would apply to both prime contractors and any subcontractors is that all research findings would have to be fully open, meaning that they are posted on the Internet as soon as practical. This would apply both to pre-clinical research and the results of clinical trials. The posting of trial results would mean that researchers around the world would be able to independently analyze the data and assess the effectiveness and risks of drugs and vaccines for different populations.
I have had many people ask me what would be the incentive for the companies that win contracts to actually innovate as opposed to just spinning their wheels. Since they presumably would want to renew their contracts when they expire, that should provide substantial incentive for them to have something to show.
Jesus: Hey, Dad? God: Yes, Son? Jesus: Western civilization followed me home. Can I keep it? God: Certainly not! And put it down this minute--you don't know where it's been! Tom Robbins in Another Roadside Attraction