The American pharmaceutical giant Merck today agreed to one of the biggest payouts in US history over its failed arthritis painkiller, Vioxx, but is set to continue battling with hundreds of British claimants.

Merck agreed a $4.85 billion (£2.42 billion) settlement, one of the biggest in history, with US claimants who blamed the drug for heart attacks and other devastating side-effects. But the company said this would not apply to British lawsuits or others round the world sueing for compensation.

The drug was withdrawn from the market in September 2004, after a study found it doubled the chances of a heart attack or stroke. It emerged that the company's scientists had been concerned for several years about the risks.

The drug was popular in the US, where it was promoted by American Olympic gold medalists on behalf of the company, and elsewhere round the world.

Merck, after digging in and fighting legal actions, today agreed the settlement with claimants, who blamed the drug for heart attacks and other devastating side effects.

Merck is facing about 27,000 US lawsuits on behalf of 47,000 individuals.

The settlement applies only to US claimants. Vioxx was prescribed to 400,000 patients in the UK and at least 300 families have launched legal actions. Hundreds of lawsuits are also pending elsewhere round the world, including elsewhere in Europe, Canada, Brazil and Australia.

Sallie Booth, a partner in the British law firm, Irwin Mitchell, which represents 100 British families, said today: "It is difficult to say what the impact will be for our clients because they are excluded from the settlement but, let's face it, they are in exactly the same position."

She added it would be "totally unfair" if they did not too receive compensation.

Irwin Mitchell sued the company in the US last year. But the court in New Jersey, where Merck is based, ruled the claims should be heard in the UK and this decision is now pending appeal.

Ms Booth said some of the firm's clients were the families of people who had suffered catastrophic heart attacks and died but most were survivors of heart attacks and strokes.

The withdrawal of the drug was a stunning setback for Merck, which had sold the drug in more than 80 countries, with sales in 2003 totalling $2.5bn. People blamed Vioxx for family fatalities. Others claimed there were drastic sid -effects, including loss of sight and paralysis.

Twenty cases have been heard over the last two years across the US. In Texas, a widow, Carol Ernst, was successful in an action againt Merck over the death of her husband, Robert.

Mr Ernst, 59, marathon runner and triathlete, had been taking the drug for eight months for pain in his hands when he died of heart arrhythmia in his sleep in 2001.

Merck countered that his death could have been due to irregular heartbeat and clogged arteries. But the jury sided with Mrs Ernst, awarding her $253m.

The combination of the drug's withdrawal and the court case led to speculation from Wall Street analysts that the company could face having to shell out $10 - $25bn in compensation and possibly bankruptcy.

But Merck, the third biggest drug manufacturer in the US, successfully defended most of the cases that followed, arguing that there was no proof that the individuals involved had taken the drug or that if they did, that Vioxx was to blame.

Some of the plaintiffs were overweight or smoked, factors that could have caused the heart attacks or strokes.

Hundreds of further lawsuits have been filed in Canada, Europe, Brazil, Israel and Australia. In Australa, between 250,000 and 300,000 people were taking Vioxx when it was pulled off the shelves.

The settlement amounts to about one year's profit for Merck. The company will be hoping that if the settlement is accepted by the US claimants, it can then move on.

The deal becomes binding only if 85% of all plaintiffs agree to drop their cases and take the deal.

Each claimant will receive about $100,000 each before legal fees and expenses are deducted, which normally work out to about 30%. Claimants who are not satifisfied with this will be free to pursue individual actions.

The settlement was negotiated over several weeks between the company, the law firms and judges hearing the cases.

"It's a fantastic deal," said Danny Becnel, a Louisiana lawyer who said he represented about 1,000 plaintiffs.