Here's the story. It's free text online. tldr: The government paid for the research and development, took all the risks, an academic researcher did all the work, a private company came along, took advantage of a naive scientist, and sold the test back to the taxpayers for 50 times what it actually cost.
(The New York Times just had a series on health care by Elisabeth Rosenthal which gave a dozen examples like this. Asthma inhalers cost about 20 to 50 times as much in the US as they do anywhere else. There are people who go to Europe once a year to buy a year's supply of drugs.)
History of Medicine
Patenting the PKU Test — Federally Funded Research and Intellectual Property
Diane B. Paul, Ph.D., and Rachel A. Ankeny, Ph.D.
N Engl J Med 2013; 369:792-794
August 29, 2013
In 1961, the U.S. Children's Bureau (USCB) embarked on a field trial of the test, requiring rapid production of kits to screen more than 400,000 babies. Guthrie, who had a cognitively impaired son and a niece with PKU, was involved in a parents' group, the National Association for Retarded Children (NARC). In consultation with the NARC, he decided that commercial production of test kits would be most efficient.
Guthrie favored the Ames Company, a division of Indiana-based Miles Laboratories, which marketed the earlier PKU tests. Although Guthrie assumed that the government would enter a contract with Ames, the company said it would manufacture the kits only if a patent were issued. In 1962, Guthrie filed a patent application in his own name and signed an exclusive licensing agreement with Miles, under which he would receive no royalties but 5% of net proceeds would be divided among the NARC Research Fund, the Association for Aid of Crippled Children, and the University of Buffalo Foundation (affiliated with the Buffalo Children's Hospital, Guthrie's employer). There was no pricing provision, an omission that Guthrie later deeply regretted.2
Miles, however, couldn't quickly produce test kits in the required quantity. So with financial support from the USCB, Guthrie rented a house in which to produce and assemble kits containing the materials necessary to perform and interpret 500 tests, at a cost of about $6 each. But when Guthrie visited the Ames Company in June 1963, he discovered that it planned to charge $262 for what were essentially the same kits. He was appalled, and when appeals to the company proved futile, he alerted USCB officials. They recommended that Miles not be granted exclusive commercial rights, in light of the large public expenditure on the test, the potential effect on states that planned to manufacture their own materials, and the steep price Miles planned to charge. Although the test had been developed with support from various organizations, the majority of the funds had come from the Public Health Service (PHS), which provided $251,700, and the USCB, which contributed $492,000 plus $250,000 through the states, chiefly for the trial. Given this federal funding, the surgeon general of the PHS determined that the invention belonged to the United States and abrogated the exclusive licensing agreement.