Healthcare firms increasingly must deal with competition and price pressures; the response is to "scale up" and focus on sectors where they believe they have the size and expertise to build economies of scale, explains Philip Springer in Personal Finance.

Germany-based Bayer AG (BAYZF:OP) (BAYRY), a long-time recommendation here, has agreed to buy the consumer health business of Merck & Co. (MRK) for $14.2 billion.

The business includes such well-known brands as Claritin, Afrin, and Coppertone. Currently, these are sold primarily in the US; Bayer plans to expand sales to a broader global customer base.

The two companies also announced a global collaboration to develop and market Bayer's line of treatments for pulmonary hypertension. The first of these, Adempas, has been approved in the US. Bayer will receive $1 billion up front from Merck, and they will split the profits.

Bayer's own long-time leading consumer-health brands include Aspirin, One A Day vitamins, and Contour blood glucose monitors.

All told, Bayer will focus more on its more competitive healthcare businesses, which currently account for half of the company's $55.6 billion annual revenues. We recommend that you buy Bayer for steady, long-term growth.

In late April, Novartis (NVS) of Switzerland and UK-based GlaxoSmithKline (GSK) announced more than $20 billion in deals. Novartis will buy Glaxo's cancer-drug business for $14.5 billion.

Novartis also is to sell its animal-drugs business to Eli Lilly (LLY), a US company, for $5.4 billion; and most of its vaccine business to Glaxo for $5.2 billion. After the deal closes, Novartis will get roughly a fifth of its $59 billion in annual revenue from cancer drugs.

The two companies also agreed to merge their consumer-health businesses under Glaxo's management, combining franchises that own some of the world's best-known brands, including Excedrin, Panadol, and Aquafresh.

The combined operation will be one of the world's largest over-the-counter drugs businesses, with annual revenues of about $10.9 billion. Novartis, like Bayer, is enhancing its core pharmaceutical (branded and generic) strengths. Buy this global leader.

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