Ministers have promised to tighten laws requiring drug firms to disclose data from clinical trials.
Seroxat is the most frequently prescribed antidepressant
It comes after the drugs regulator announced GlaxoSmithKline would not face criminal proceedings over claims it withheld information on Seroxat.
But they warned GSK should have been quicker to raise the alarm on the risk of suicidal behaviour associated with the antidepressant in the under-18s.
GSK has rejected claims it improperly withheld drug-trial information.
The Medicines and Healthcare products Regulatory Agency (MHRA) received data from clinical trials in May 2003 showing that patients under 18 had a higher risk of suicidal behaviour if they were treated with Seroxat than if they received a placebo.
Data also showed that Seroxat was not effective for treating depression in children and adolescents.
The drug was subsequently banned for use in under 18s.
But Professor Kent Woods, MHRA chief executive said they were disappointed GSK had not given them information earlier and that drugs firms had an "ethical responsibility".
"I remain concerned that GSK could and should have reported this information earlier than they did.
"All companies have a responsibility to patients, and should report any adverse data signals to us as soon as they discover them.
"This investigation has revealed important weaknesses in the drug safety legislation in force at the time."
He said subsequent legislation has partially addressed the problem but more still needed to be done.
The MHRA spent four years looking at over one million pages of evidence to determine whether GSK had withheld information.
They concluded there was no realistic prospect of a conviction as legislation in place at the time was not sufficient to require companies to inform the regulator of safety information when the drug was being used for, or tested outside its licensed indications.
In common with many drugs, Seroxat was never licensed for the under 18s, but doctors could still prescribe it.
A BBC Panorama investigation last year reported that secret e-mails showed the drug company distorted trial results, covering up a link with suicide in teenagers.
The internal documents suggested GSK knew there was a problem with the effectiveness of Seroxat in children five years before the drug was banned.
Health minister Dawn Primarolo said the government would take immediate steps to secure a strengthening of the law in the UK and Europe.
She also said they wanted to make it clear to all pharmaceutical companies that, "notwithstanding the limitations that may exist in the law, they should disclose any information they have that would have a bearing on the protection of health".
Dr Alastair Benbow, medical director for GSK Europe said: "We firmly believe we acted properly and responsibly in first carrying out this important clinical trials programme and then informing the regulatory agencies when we identified a potential increased risk of suicidal thinking and behaviour in patients under 18.
"GSK is committed to working with the government, appropriate regulatory authorities and other pharmaceutical companies to take whatever action is necessary to improve legislation and policy in this area."
Andrew McCulloch, chief executive of the Mental Health Foundation said it was "totally unacceptable" to hear that young people may have taken their own lives due to a lack of transparency by a pharmaceutical company.