THE company behind a drug that caused birth defects to an estimated 10,000 fetuses worldwide ignored and covered up repeated warnings about the potential for deformities, a report says.

Hundreds of Australian babies were among those harmed by the German-made sedative and morning sickness treatment thalidomide.

Never-before-published excerpts of files from thalidomide maker Grünenthal obtained by Fairfax explicitly warn about the drug's potential to harm fetuses, Fairfax media reported today.

Grünenthal has always maintained the thalidomide tragedy was unforeseeable and it had acted in accordance with the scientific knowledge and prevailing standards of the 1950s.

However, Fairfax says the Grünenthal files expose a 50-year cover-up and “demolish the company’s long-held position that the scandal was an unforeseeable tragedy”.

The effects of taking thalidomide during pregnancy included newborns with severe physical deformities, such as those affecting Melbourne woman Lynette Rowe, who was born without arms and legs.

Ms Rowe last week reached a multimillion-dollar compensation settlement with UK thalidomide distributor Diageo.

She will remain the lead plaintiff in a class action against Grünenthal, which continues to deny any culpability.

Fairfax said the Grünenthal files reveal German medical professionals had been telling the pharmaceutical giant of their concerns about the link between thalidomide and children's deformities for up to two years before the drug was banned in Australia in 1961.

One company file shows eight Grünenthal employees or their family members had deformed children between 1959 and 1961.

The company told doctors there was no information suggesting the drug was unsafe, Fairfax says.