Tasmanian Alkaloids has called on the federal government to relax controls over cannabidiol (CBD) - a non-psychoactive chemical found in cannabis plants.
A Senate inquiry was established last year to look into barriers for patients who wished to access medicinal cannabis.
Tasmanian Alkaloids chief executive Ross Murdoch said CBD should not have the same legislative and regulatory controls as the psychoactive drug tetrahydrocannabinol (THC).
He said the International Narcotic Control Board was soon to debate regulations over CBD and it was believed the international body would discontinue regulation of the chemical due to its non-psychoactive properties.
Dr Murdoch said it was a concern there was no strategy in place in Australia to address how a change would impact the country's regulations.
He said a failure to act would stifle the country's small medicinal cannabis industry and see well-advanced international companies surpass it.
Dr Murdoch said the price of potential medicinal cannabis therapies for patients would increase and its availability would decrease.
He said large amounts of CBD could be extracted from industrial hemp residue.
"Large-scale extraction facilities, such as that operated by Tasmanian Alkaloids, are well-placed to extract the CBD from this material at scale, making it commercially feasible and the product potentially cheaper than that produced in smaller contained facilities," Dr Murdoch said.
"A current conflict between state and federal legislation, pertinent to cannabis crops, prevent a crop used for fibre and seed also being extracted for medicinal purposes.
"It is therefore presently illegal to extract the CBD from what is considered as waste material or a byproduct of the industrial hemp industry."
CBD is known to treat pain, nausea and limit epileptic seizures.
Sign up for our newsletter to stay up to date.