In the following video, Fool contributor Matt Thalman discusses how he plays the pharmaceutical industry. While the likes of Pfizer (NYSE:PFE) and Merck (NYSE:MRK) may be the first names that come to mind, Matt doesn't think they're the best investing choices, as he thinks the major drug companies don't offer the correct amount of reward to compensate for their risk.

That's why Matt prefers generic pharmaceutical companies. Mylan Pharmaceuticals (NASDAQ:MYL) and Teva Pharmaceutical Industries (NYSE:TEVA) are two of the big names in this market, and Matt says investors might consider looking here for a combination of less long-term risk but a strong potential for good returns.