Primodos was introduced in 1958 in Britain and was on the market for 20 years. It contained strong hormones which was used in the morning-after pill.
In New Zealand it was banned in 1975.
British media reported that hundreds of families had long claimed Primodos caused birth defects and had been battling for years for compensation.
Until now, campaigners were unable to establish a causal link between the drug and their babies' health problems.
But they have been given hope by the discovery of archived documents in Germany which drew a connection between the two.
That has prompted the campaigners to allege a cover-up and compare it to the thalidomide scandal, in which thousands of mothers gave birth to children without limbs or with other defects after being prescribed the morning sickness drug.
Bayer continues to deny the drug was responsible for any congenital abnormalities.