Two decades of litigation in North America over birth deformities caused by the morning-sickness drug thalidomide ended last week with the signing of a settlement for the last 13 of about 100 Canadian victims.

The settlement "will close the book on the thalidomide saga," plaintiffs' lawyer Arthur T. Raynes said in Philadelphia. "At last the remaining victims of this tragic episode . . . are to be compensated."

It is estimated that about 8,000 children in the West were born with grave birth defects in the late 1950s and early 1960s because their mothers took the drug during the first trimester of pregnancy.

Last Wednesday's settlement had been reached informally June 18 just as a jury in Cleveland was about to try a lawsuit filed against Merrell Dow Pharmaceuticals, which manufactured the drug in the United States for distribution in Canada. An Ottawa man, 20, born with no left arm or right leg and with a partial right arm and left leg, filed the suit.

The settlement came after an obstetrician reversed his pretrial testimony that he had not dispensed thalidomide to the mother. He said he had found a bottle in a desk drawer 18 years after the plaintiff's birth.

Raynes showed that Merrell had sent the doctor 12 bottles of thalidomide. Raynes also obtained testimony from three medical experts that thalidomide had to be the cause of the deformities.

Signing the agreement were Raynes, counsel for 10 Quebec and two Ontario plaintiffs, including the Ottawa man; Donald P. Traci of Cleveland, counsel for a third Ontario plaintiff, and Merrell Dow, formerly the William S. Merrell Co. Richardson, Merrell, Inc., the original thalidomide licensee for the United States and Canada, sold Merrell in 1981 to the Dow Chemical Co.

In the United States, a hitherto unreported settlement last October disposed of the last thalidomide lawsuit, which Raynes had filed in federal court here for a Falls Church family, retired Air Force Col. Donald Swenholt, his wife, Frances, and their severely deformed daughter, Jamie, 23.

Neither thalidomide settlement allows the parties to disclose dollar amounts, but Raynes called them "fair and equitable."

The United States narrowly escaped a major thalidomide disaster in which an estimated 10,000 children could have been born deformed.

Merrell had pressured the Food and Drug Administration to release the drug but was blocked by FDA medical officer Frances O. Kelsey.

Still, a small number of American children, reportedly about a dozen, were deformed by thalidomide after Merrell distributed 2.5 million tablets to more than 1,200 physicians for purported tests while it awaited expected FDA marketing approval.

The Swenholts alleged that some tablets went to the Maxwell Air Force Base pharmacy and were prescribed in 1960 for Mrs. Swenholt.

Jamie, their fourth child, was born in April, 1961, with malformations of all four limbs and numerous other handicaps, including mental retardation.

The Canadian settlement followed a rare legal battle in U.S. courts for victims born in Quebec.

The provincial legal code, unique in North America, required that a product-liability lawsuit be filed no more than one year after the occurrence of an injury claimed to be related to the product.

The requirement had seemed to make litigation hopeless for many of the children because they had been injured in the womb more than a year before Merrell, in December, 1961, notified physicians of a possible link between birth defects and thalidomide.

After Raynes began to investigate the possibility of an end run around the provincial code, several Quebec thalidomide familes contacted him for help.

He succeeded when he found that a Richardson, Merrell subsidiary, J.T. Baker Co. in Phillipsburg, N.J., had made thalidomide that had gone first to Cincinnati for processing into tablets, and then to Canada.

From 1956 to 1983, Merrell also sold Bendectin, the only FDA-approved drug for morning sickness.

On July 14, Merrell offered $120 million to settle all claims that it caused a wide variety of birth defects. No cause-effect relationship between it and the defects has been proved.