Pharmaceutical formulation patents lose patent term extension ground: Full Federal Court's active pharmaceutical ingredient pivot

A landmark ruling from Australia's Full Federal Court has fundamentally altered the framework for pharmaceutical patent term extensions, restricting their application and upending established practices in the industry.

This outcome highlights the ongoing conflict between incentivising ground-breaking discoveries of active pharmaceutical ingredients and curbing extensions for incremental advancements, such as novel delivery systems or formulations.

The verdict challenges "zombie patent term extensions," where pre-existing formulation extensions hang in precarious limbo, ripe for s 191A rectification by IP Australia or opportunistic challenges from rivals.

Background

Central to this dispute was a battle over long-acting injectable versions of an established anti-psychotic medication, where precise statutory interpretation proved decisive in favouring generic competition over prolonged originator market exclusivity.

Otsuka Pharmaceutical owned an Australian Patent, which claimed controlled-release formulations of aripiprazole—a drug already approved in Australia since 2003 for treating schizophrenia and related disorders.

Although the patent's base 20-year term was set to lapse in 2024, Otsuka obtained a valuable five-year extension until 2029, grounded in the regulatory approval of its ABILIFY MAINTENA product on the Australian Register of Therapeutic Goods (ARTG). This extension aimed to recoup investments amid lengthy approval processes.

Sun Pharma ANZ, eyeing market entry with its competing long-acting injectable ARIPENA, initiated "clear-the-way" proceedings to invalidate both the patent claims and the extension.

At the initial trial in Sun Pharma ANZ Pty Ltd v Otsuka Pharmaceutical Co Ltd [2025] FCA 44, the Federal Court not only struck down the extension but also declared key claims invalid for insufficient clarity under ss 40(2)(b) and 40(3) of the Patents Act 1990 (Cth).

The primary judge reasoned that the formulation claims failed to encompass a "pharmaceutical substance per se" as required by s 70(2)(a) for extension eligibility. Otsuka promptly appealed, with Sun Pharma cross-appealing to uphold the extension's revocation.

Court's key analysis

In Otsuka Pharmaceutical Co Ltd v Sun Pharma ANZ Pty Ltd [2025] FCAFC 161, the Full Court began by reversing the trial judge's invalidity rulings on claim clarity. It determined that the claims, which specified formulations through defined release profiles and interactions with excipients, met the requisite standards under ss 40(2)(b) and 40(3).

The Court found no undue ambiguity, as a skilled person could derive workable boundaries from the patent specification's detailed examples and pharmacokinetic data.

Turning to the patent term extension (PTE), the bench unanimously affirmed its invalidity, delivering a restrictive reading of s 70(2)(a). This provision demands that at least one claim includes a "pharmaceutical substance per se" first registered through the nominated ARTG entry.

Employing principles of textual analysis, statutory purpose, and context, the Court limited "pharmaceutical substance" to active pharmaceutical ingredients (APIs), like aripiprazole, that produce therapeutic effects through direct chemical or physico-chemical interactions within the body. Inert excipients in formulations, by contrast, were deemed ineligible.

The interpretation leaned on foundational materials, including the Explanatory Memorandum to the Patents Amendment Bill 1989, which framed PTEs as redress for regulatory hurdles faced by novel active substances. Harmonisation with the Customs (Prohibited Imports) Regulations 1956 reinforced this, mirroring its API-centric definition.

The Court dismissed prior administrative grants of formulation PTEs as erroneous non-precedential decisions, clarifying that claims centred on release kinetics inherently excluded any pure "substance per se," irrespective of ABILIFY MAINTENA's ARTG status.

Strategic and policy implications

Pharmaceutical originators now face urgent portfolio reviews, compelled to elevate API-focused claims for future PTE pursuits while formulation innovations settle for unextended 20-year protection.

Generic manufacturers benefit from swifter commercialisation routes, potentially slashing drug prices and enhancing patient access.

Yet the ruling reignites discourse on PTE's core rationale: offsetting 12–15-year regulatory lags for innovative APIs, without subsidising reformulations that skirt evergreening prohibitions.

Should Otsuka's anticipated High Court of Australia special leave application falter by early 2026, IP Australia could overhaul PTE examination protocols, signalling a tighter regime ahead.

Overall conclusion

This judgment heralds a seismic realignment in Australian PTE law for pharmaceutical patents, anchoring extensions firmly to pioneering active ingredients and dismantling safeguards for formulation-based lifecycle extensions.

Its broad ramifications for R&D investment, market dynamics, and regulatory harmony position it as prime candidate for High Court review, where Otsuka is poised to seek special leave in the near term to contest the Full Court's stringent s 70(2)(a) confines.

For more information on patent term extensions for pharmaceutical patents, or for any assistance regarding patent or intellectual property rights more generally, please contact a member of Thomson Geer’s Intellectual Property team.

Authors

Ben Coogan | Partner | +61 7 3338 7503 | bcoogan@tglaw.com.au

Kiara Gunner | Summer Clerk

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