TheStreet.com's Jim Cramer says the overreaction to pharma news lets you into the best names on the cheap.

There are so many crazy mistakes being made by this market that you have to keep your eyes open every minute. The biggest-cap stocks are acting like small-cap stocks.

Which brings me to Merck (NYSE: MRK) (Cramer's Take). This morning, Merck traded down to $47 off some deaths from maybe one of the most important inventions of all time, Gardasil, the anti-cancer vaccine.

Three bucks! How can that be! This vaccine's not going off the market. When you put this on top of how Schering-Plough (NYSE: SGP) (Cramer's Take) got cut in half because of fears that a drug will be pulled that represents 50% of its earnings (after the Organon merger, that's my estimate), you can see how extremist the market has become. Both Merck and Schering act like there will be no Vytorin sales at all next year at this time.

In Stay Mad for Life, I talk about how I was spooked out of Bristol Myers (NYSE: BMY) (Cramer's Take) because people predicted that it would have to cut its dividend because a generic form of Plavix could come early and destroy that franchise. Wrong! The generic form was out there and then got pulled off, and the stock rallied 12 points from $20.

Or last year, when Bausch & Lomb (NYSE: BOL) (Cramer's Take) fell to $43 off of a worry that its main solutions business would be shut down because of an eye fungus that it caused.

A few months later you got a $65 bid.

I am telling you that when you get that kind of action in a Merck, in a Schering, ripped right off the headlines, you have to buy, not sell.

I have been buying SGP the whole way down for Action Alerts PLUS, alongside the CEO, Fred Hassan, who just bought $2 million worth of stock. Merck coming down here off of Gardasil should be bought, too.

Random musings: We might need MBIA (NYSE: MBI) (Cramer's Take) and Ambac (NYSE: ABK) (Cramer's Take) to fail in order to keep the Fed in the game. Let's hope Bernanke knows the symbols.

Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer was long Schering-Plough.

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