The warning comes as medical experts and a former US army doctor urge the ADF to stop using the drug mefloquine, otherwise known as Lariam, which many veterans believe has caused permanent psychological damage, anxiety, vertigo and nightmares.

Previously classified documents, obtained by Fairfax Media and published on Wednesday, revealed mefloquine was given to soldiers for at least 14 years after the military became concerned about serious side effects.

The drug remains the third-choice antimalarial for the ADF and is the subject of an ongoing British House of Commons defence select committee hearing. It is also under investigation by the Inspector-General of the Australian Defence Force.

Mefloquine has been used on up to 2000 Australian personnel since a controversial trial in East Timor in 2001-02. Senior ranks have resisted banning the drug because it would prevent some deployment opportunities.

Opposition defence spokeswoman Gai Brodtmann said the government needed to "rigorously investigate this issue and be open and transparent with the results".

"We'll wait and see what the current internal Defence investigation recommends, but if this serious issue is not given appropriate consideration, Labor will look to establish a Senate inquiry," she said.

Dr Remington Nevin, a former major in the US Army Medical Corps who now lectures at John Hopkins University in Baltimore, said a public inquiry was necessary to address "ethical failings" by the ADF.

"Foreseeable risks from mefloquine were not adequately weighed; the rights, safety, and wellbeing of military subjects were not adequately considered," he said.

"Inadequate medical care has been provided to study subjects plausibly experiencing chronic adverse neuropsychiatric effects from the drug."

But the Department of Defence has defended the use of mefloquine and insists the classified documents proved appropriate measures were taken to ensure safety.

"The ... meeting minutes demonstrate Defence has exercised due diligence and the drug trials were conducted with appropriate oversight mechanisms in place," a spokesman said.

"Where specific concerns were raised, appropriate measures were taken to address them to the satisfaction of the committee."

A spokesman for Minister for Veterans Affairs Stuart Robert said the Repatriation Medical Authority was conducting a review into the links between mefloquine and panic and anxiety disorders.

"This has been an ongoing matter for Defence and has the potential to have an impact on future rehabilitation and compensation claims," he said.

Close to 1000 British soldiers have required psychiatric treatment after taking the drug since 2007, according to information tendered at the House of Commons hearing.

Dr Remington, who told the hearing many soldiers hid their side effects to avoid stigma, said the ADF should follow the lead of other militaries and ban the drug.

"There is no longer a compelling need for mefloquine, and the exclusive use of safer daily alternatives can ensure that the risks from Lariam are avoided, while providing comparable or better protection against malaria," he said.

US Army Special Operations Command documents reveal special force soldiers experienced permanent vertigo, dizziness, and cases of suicide ideation and suicide after taking the drug.

In 2013, the command banned the drug, declaring "consideration must be made for the impact of this medication on our population".

Documents obtained by Fairfax Media in late November revealed Chief of Army Lieutenant-General Angus Campbell would not support a campaign against the drug, as it would deny deployment opportunities.

"I would be acting to the disadvantage of those members for whom mefloquine is the most suitable malaria prophylaxis," he said.

Dr Jane Quinn, a senior lecturer at Charles Sturt University, said the declassified documents proved the military were concerned about the potential for serious neuropsychiatric side effects as early as 2001.

"They also recognise that this was a safety trial, not just an efficacy trial and that this needed to be reflected in the title of the proposal," she said.

"This is significant, as this clearly identified that safety for the drug was not established and that ADF personnel were being used to evaluate safety."

Dr Quinn said the documents also revealed concerns about transparency, with officials admitting it would have be preferable to convey information "openly and honestly" to reduce the appearance of a cover-up.

"This statement suggests that proceedings to date had not been perceived to be open and honest, nor is it clear that any results were ever conferred to the troops involved in these trials, despite this request from the committee," she said.

Do you know more about this story? Email henry.belot@fairfaxmedia.com.au.