For the same reason they give out patents, to incentive generic development.

If all the generic manufacturers could rush in all at once, the price of the generic would falls to pretty much the cost of production quite quickly.

As a generic manufacturer, are you willing to spend $10M if you aren't sure you'll recoup it? Maybe.

But if you know for certain you'll be the only supplier for 6 months, then you have more certainty to make the investment.

Isn't there an argument that if you give people an extra $10M, whether in this case or in any random subsidy, that it will be competed away, and thus it's a waste?

I feel like people use that argument in other contexts but it would apply here too.

Well the subsidy has a finite time period and is limited to one company so I’m not sure the benefit could be competed away.