Telprevir, which will be marketed under the brand name Incivek, is approved for use with interferon therapy, the FDA said.
The drug was approved on clinical data that showed about 79 percent of patients receiving Incivek with older drugs had no signs of the virus 24 weeks after stopping treatment.
Merck recently enlisted the aid of rival Roche to promote its drug, Victrelis.
Clinical data has suggested that Incivek has superior efficacy to Victrelis and may capture more of what is expected to be a multi-billion-dollar market.
The FDA approved Victrelis May 13, based on clinical data showing that about two-thirds of patients receiving Victrelis in combination with the older drugs had no signs of the virus 24 weeks after stopping treatment.