Merck and Johnson & Johnson have reached a settlement in their dispute over the distribution rights for Remicade and Simponi, nearly two years after J&J requested arbitration in the case.

Merck will give up marketing rights to both drugs in Canada, Central and South America, the Middle East, Asia and Asia Pacific territories. Those markets represented 30% of Merck’s Remicade and Simponi revenues. The company will retain exclusive rights in Europe, Russia and Turkey. Merck’s total revenues from the two drugs in 2010 was $2.8 billion, of which the relinquished territories accounted for approximately $850 million.

In addition, all profits from Merck’s revenues in its remaining territories will be split 50/50 with J&J. Previously, the split was 58/42 and was scheduled to reach 50/50 in 2014. Merck will also make a one-time payment of $500 million to J&J.

The companies’ dispute centered around a change-of-control provision in the marketing agreement between J&J and Schering-Plough. Merck’s acquisition of SP was structured so as to make SP the acquiring company, despite the fact that it was a fraction of the size of Merck and most of its executives departed the new company. J&J argued that this was a ploy to avoid giving up the rights to Remicade and its followup, and requested arbitration in May 2009.

“We are pleased to have reached this voluntary agreement and look forward to continuing to serve patients in need with Remicade and Simponi throughout Europe, Russia and Turkey,” said Kenneth Frazier, President and Chief Executive Officer of Merck. “The immunology field is a rapidly growing therapeutic area. Merck will have a strong footprint in this category through our significant retained interests in Remicade and Simponi, both of which will be important contributors to our overall portfolio. We also are committed to ensuring a smooth transition for customers and patients in the territories being relinquished, with no impact on product supply.”

J&J’s 2010 revenues for Remicade were $4.6 billion, while Simponi accounted for $226 million. Those figures include $1.2 billion in product sales to Merck, for sale in the latter’s exclusive territories.