Merck said on Friday it had reached a US$4.85 billion deal that would allow the US pharmaceutical giant to settle more than 95 percent of lawsuits over its anti-inflammatory Vioxx.
Merck had faced thousands of suits over Vioxx, which the firm yanked from sale in September 2004 after an internal study showed it doubled the risks of heart attack in patients who took it for 18 months or longer.
The firm said in a statement that the agreement did not represent any admission of liability on Merck's part.
Yet the move marked a major reversal of course for the company which had said it would fight more than 27,000 lawsuits.
"This is a good and responsible agreement that will allow the company to concentrate even more fully on its mission of discovering, developing and delivering novel medicines and vaccines," Merck chairman and chief executive Richard Clark said in a statement.
The drug maker will set up two funds, one with US$4 billion for claims of heart problems and another for US$850 million for ischemic stroke claims.
Merck said it did not know how many plaintiffs would be covered by the deal as amounts paid to individual claimants would vary.
Claims were to be reviewed on an individual basis, Merck said, stressing that this was not a class-action settlement.
The agreement was signed by the parties after Merck lawyers met with three of the four judges overseeing the coordination of more than 95 percent of the current claims in the Vioxx litigation.
Merck will continue to fight all claims that are not included in the resolution process, it said.
The company had argued that it properly disclosed all potential risks attached to prolonged use of Vioxx.
The firm had mixed results in the Vioxx cases that had gone to trial.
Mark Lanier, a lawyer who won a US$253 million verdict in the first Vioxx lawsuit in August 2005, said the settlement "was simply the right thing to do, and we're grateful that the people at Merck recognized that it was the right thing to do."
Lanier, a Houston, Texas-based lawyer, represented the wife of a former marathon runner who died after taking Vioxx for only eight months.
"This agreement is the product of our defense strategy in the United States during the past three years and is consistent with our commitment to defend each claim individually through rigorous scientific scrutiny," said Bruce Kuhlik, senior vice president and general counsel of Merck.
"This agreement also makes sense for the company because since 2004, we have reserved approximately US$1.9 billion for defending Vioxx litigation and, absent this agreement, could anticipate that the litigation might stretch on for years," he said.
Juries have decided in favor of the company 12 times and five times for plaintiffs, with two mistrials.
Merck shares rallied to close up 2.06 percent at US$55.90 on the news amid a broader market selloff.
"The agreement significantly diminishes a major uncertainty facing Merck, and the proposed settlement amount -- while still a large number -- is well within Merck's ability to fund without significantly weakening its very strong financial profile," Standard & Poor's analyst Arthur Wong said.