Paxil is marketed as Seroxat in many markets

It agreed the deal with Eliot Spitzer, New York Attorney General, who brought the case on behalf of 49 states.

GSK was accused of using frivolous patent-infringement lawsuits against generic producers of Paxil, keeping the drug's cost higher than necessary.

In reaching the deal, GSK said it denied any wrongdoing or liability.

Monopoly claim

"We made the decision that settling was appropriate to avoid the expense and distraction of protracted litigation," a company spokeswoman said.

The settlement will cover the cost of drug purchases by Medicaid, the state and federally funded medical programme for low income patients.

"GSK used the courts to hold onto a monopoly for a popular drug and the end result was that consumers - including Medicaid - paid more than they should have," said Jay Nixon, Missouri Attorney General, in a statement.

The company reached a separate deal with Mr Spitzer in 2004 to settle claims that it withheld negative information about Paxil, which is marketed as Seroxat in many markets.

As part of the agreement, it agreed to publish results of clinical trials of new drugs.