Health and pharma research financed privately by private corporations have the incentive of high returns on research that leads to successful drug development. However, public research on health is not as easily financed. It can be argued that public research on health exhibits public good characteristics, and requires a more active intervention to provide. I came across an interesting initiative by the Thai government which uses an earmarked tax on alcohol and tobacco to fund public health research. The Thailand Health Promotion Foundation draws 2% of excise tax to fund research on health. Apparently it raises around 50 million dollars a year.
Earmarked taxes often come with a lot of problems especially if the national treasury dips its fingers into the jar on an ad hoc basis when their own funds are short. It’s important the money goes directly into a dedicated, and insulated, fund.
Haven’t read up much on the mechanics and structure of this particular health promotion fund, but there is an interesting paper here on the lessons learnt from the Thailand experience.