Luke McIlveen – Hundreds of Australian soldiers were used as guinea pigs by the army in tests of an anti-malaria drug which has psychotic side effects while they were serving in East Timor.

An investigation by The Sunday Telegraph reveals that the soldiers were ordered to take the drug, Larium, by the army as part of tests to observe side effects, which can include depression and paranoia. But the soldiers claim they were not fully informed of the possible adverse reactions and some are planning a class action against the army.

Members of the 2RAR battalion and 4RAR commandos have suffered family breakdowns, paranoia and suicidal thoughts after taking Larium, also known as Mefloquine. One young soldier, who received three service medals in East Timor, took his girlfriend hostage at gunpoint soon after his return. Other soldiers have experienced illnesses such as kidney disease and migraine.

Brisbane firm Quinn and Scattini is set to launch a class action against the army on behalf of personnel who took Larium while in East Timor. "We believe liability will be found in these cases," lawyer Simon Harrison said.

Army officials admitted using soldiers as guinea pigs but claimed the tests involved "dozens rather than hundreds" of soldiers. The defence department refused to detail the number of soldiers who have taken Larium but it conceded that the drug is used as a back-up to other anti-malarial drugs.

But the department denied that Larium has any side effects, despite it being sold with warnings and that the Therapeutic Goods Administration has reported adverse reactions. In addition, the US military conducted an investigation into its use after two soldiers on the drug murdered their wives.

Soldiers interviewed by The Sunday Telegraph estimate the number of Australian soldiers on Larium is close to 400. Some were told to take the tablets while others were offered the choice between taking Larium weekly or another drug daily.

Army top brass admits Larium is still used as an alternative to the first choice malaria drug, Doxycycline. "The Australian Defence Force considers that Mefloquine (Larium), a drug approved by the Australian Therapeutic Drug Administration, is a suitable drug to use in the prevention and treatment of malaria," said Rear-Admiral Brian Adams, head of the Defence Personnel Executive. "We acknowledge that any drug may have some level of risk but in this case we worked on the basis that the consequences of malaria justified the controlled use of Mefloquine for those people unable to tolerate Doxycycline."

A spokeswoman for Roche Australia – which manufactures Larium – said the company's medical director was overseas and unavailable for comment. A Therapeutic Goods Administration spokesperson said the product information that comes with Mefloquine in Australia has clear statements about psychiatric side effects.