On the contrary, this is pretty close to what we have right now. Companies don’t like to spend much on R&D once they’re out of the startup phase. A good chunk of that startup phase R&D was actually taking place at a university with public funds. This is especially true of pharmaceuticals. So the answer to the question of “when does it get handed off to private industry?” is to just look at what’s happening already.

The exception is big monopolies. AT&T’s Bell Labs is a legendary R&D department. IBM, Microsoft, and Google all likewise have significant pure R&D going on, and even engineers who don’t like those companies salivate at the opportunity to work in that capacity for them.

But then you’ve got big monopolies on your hands, and that’s a whole other problem.