New York ? Pfizer Inc. announced Monday that it is buying Pharmacia Corp. for $60 billion in a deal that would give the world’s biggest drug company a medicine chest full of treatments for baby-boomer ills like baldness, arthritis, impotence and high cholesterol.

The all-stock deal continues the trend toward consolidation in the pharmaceutical industry, which is scrambling to produce new blockbuster medicines while coming under growing public and government pressure to hold down drug prices.

“That this brings cost savings is obvious,” Pfizer chief executive Henry McKinnell said.

“But it creates a company that can grow more than the two companies could separately.”

The new company would have annual revenue of $48 billion and a research-and-development budget of more than $7 billion. It would combine Pfizer’s marketing prowess with Pharmacia’s eye care and cancer drugs, treatments where Pfizer is not strong.

Pfizer already has a lineup that includes Lipitor (high cholesterol), Viagra (impotence) and Zoloft (depression), and its over-the-counter products include Listerine mouthwash and Visine eye drops.

Pharmacia’s major drug is the arthritis medication Celebrex. It also makes Rogaine for hair loss, Nicorette stop-smoking products, the bladder-control drug Detrol, Luden’s cough drops and the anti-diarrhea syrup Kaopectate.

The companies said the merger should save $2.5 billion by 2005.

The deal was approved by the boards of both companies. It still needs the OK from shareholders and regulators.

The timing was a surprise, given the slump in the economy and the plummeting stock market.

Pfizer stock fell $3.42, or 10.6 percent, to $28.78 in trading Monday on the New York Stock Exchange. Pharmacia rose $6.66, or 20.4 percent, to $39.25. Under the deal, Pharmacia stockholders would receive 1.4 shares of Pfizer for each share of Pharmacia.

Analysts predicted the deal will prompt other mergers.

“It is a good fit for both companies,” said Banc of America analyst Len Yaffe. “And it should be interesting to watch what the other companies do.”