Editor's Note: In the video, Michael Douglass refers to a quote from Mylan's president. The quote is actually from the president of Mylan's North American operations, Anthony Mauro. The Fool regrets the error.
"The unintended consequences of this rule would be nothing short of catastrophic."
That was the response from Ralph Neas, president of the Generic Pharmaceutical Association, or GPhA, to a recently-proposed FDA rule to require generic drug makers to update product safety information when they become aware of new potential safety issues.
GPhA fears that potential liability lawsuits would force generic pharmaceutical companies like Teva (NYSE:TEVA), Novartis (NYSE:NVS), Actavis (NYSE:AGN), Mylan (NASDAQ:MYL), and Abbott (NYSE:ABT) to raise prices for their drugs to remain profitable. Generic drugs, after all, are notably lower-margin than branded pharmaceuticals. The same press release from the quote above predicted that the rule change would cost Medicare and other government programs $1.5 billion annually and private insurers and patients $2.5 billion annually.
How worried should generic drug makers, and their investors, be about this potential rule change if it comes to pass? And what are the implications for patients? Motley Fool health care analysts David Williamson and Michael Douglass answer in the video below.
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David Williamson owns shares of Abbott Laboratories and Novartis. Michael Douglass has no position in any stocks mentioned. The Motley Fool recommends Teva Pharmaceutical Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.