The Washington Post had an interesting piece on how a hedge fund managed to secure $16 million in public funds (10,000 food stamp person-years) for a shell company, Ridgeback Biotherapeutics, which then used the money to contract for research with Emory University. When the results showed some promise, Ridgeback Biotherapeutics then sold the rights to Merck, which is doing further testing.
This problem would have been easy to avoid if the government had a rule that when it pays for research, all the findings are open-source (meaning posted to the web as soon as practical) and that everything developed remains in the public domain. That means that any drugs or vaccines developed with public funds would be available as cheap generics.
This does conflict with the widely held view that the role of the government is to redistribute as much money to rich people as possible, but if anyone cared about economic efficiency, this is the path they would be advocating.