1 - I've just re-read the article and I can't find any mention of a specific pump. Did I miss something?
2 - All insulin pumps that I am aware of (including the Omnipod you mention) don't read blood glucose levels: the patient has to manually check their blood using a finger pricker or similar then adjust the pump accordingly. The device highlighted in the article is a blood glucose reader, not a pump.
To address your points:
(1) The GOVERNMENT is giving a grant to an academic institution who will, if successful, develop this as a PRIVATE company. Is that capitalist enough? Private company gets free money from government!
(2) I'm completely happy for MY money to be spent on something which will help thousands of my fellow diabetics and, thanks to the GOVERNMENT, we won't have to pay extra for.