Potential impact of Otsuka v Sun Pharma on Australian Patent Term Extensions: An empirical analysis

This article examines the potential practical implications of Otsuka FC through an empirical review of Australian patents that had been granted a PTE and remained in force at the time of analysis. Rather than considering the issue solely from a legal or theoretical perspective, this analysis evaluates the potential impact of the Full Federal Court’s reasoning on the existing Australian PTE landscape and provides examples of claims which could be classified as “High-risk”, “Low-risk” and “Uncertain”, according to the likelihood that the PTE could be vulnerable to challenge, if the Full Federal Court position is allowed to stand.

Given the current uncertainty, we analysed all Australian patents with a granted patent term extension that were in force at the time of review, using a combination of artificial intelligence-assisted review and human assessment, in order to triage cases, and identify patents that could be at risk of invalidation.

The Australian Patent Term extension regime

Australia’s patent term extension regime is established under section 70 of the Patents Act 1990 (Cth) (the “Act”). The regime is intended to compensate pharmaceutical patentees for regulatory delays that reduce the effective period of market exclusivity by allowing an extension of patent protection following lengthy approval processes required before pharmaceutical products can be included on the Australian Register of Therapeutic Goods (ARTG).

Eligibility for a PTE is subject to several statutory requirements, including that the patent must claim a pharmaceutical substance per se, or a pharmaceutical substance produced by recombinant DNA technology, and that goods containing the pharmaceutical substance have received the relevant regulatory approval.

The scope of the expression “pharmaceutical substance per se” has historically been an area of judicial consideration, as its interpretation determines the types of pharmaceutical inventions that are eligible for extended patent protection.

The Otsuka FC decision

The Full Federal Court’s decision in Otsuka FC has introduced significant uncertainty regarding the interpretation of the requirement that a patent must claim a “pharmaceutical substance per se” to qualify for a PTE. In summary, in Otsuka FC, their Honours concluded that formulations do not fall within the definition of a “pharmaceutical substance per se” and therefore will not be eligible for PTE in Australia.

The Full Federal Court considered whether claims directed to controlled-release injectable formulations of aripiprazole could satisfy the requirement in section 70(2)(a), of the Act, that a patent disclose and claim a “pharmaceutical substance per se”. The Court held that, for the purposes of the PTE regime, a “pharmaceutical substance” is limited to the API or active substance and does not extend to a formulation of the active with therapeutically inactive excipients. Accordingly, the controlled-release aripiprazole formulations were deemed ineligible for the PTE.

This approach marks a significant departure from the broader position adopted in earlier first-instance authorities. Earlier decisions had progressively adopted a broader understanding of “pharmaceutical substance per se”. In Pharmacia Italia SpA v Mayne Pharma Pty Ltd [2006] FCA 305, the Federal Court held that a product claim did not cease to be directed to a pharmaceutical substance merely because it contained process-related limitations used to characterise the product. In Spirit Pharmaceuticals Pty Ltd v Mundipharma Pty Ltd [2013] FCA 658, a controlled-release formulation was regarded as constituting a “pharmaceutical substance per se”, in circumstances where the formulation components themselves contributed to the controlled therapeutic delivery of the active ingredient. More recently, in Cipla Australia Pty Ltd v Novo Nordisk A/S [2024] FCA 1414, Perram J expressly confirmed that “pharmaceutical substance” could encompass formulations and that the individual excipients need not themselves have therapeutic activity. Their Honour in Otsuka FC departed from that line of authority by holding that the relevant pharmaceutical substance is the API, rather than the formulation in which it is delivered.

The High Court heard Otsuka’s appeal on 16 and 17 June 2026 and has reserved judgment, with the final decision expected to be issued in September/October 2026, so the final scope of the PTE regime remains unsettled.

The practical significance of the appeal extends beyond future PTE applications. A large number of Australian patents have already been granted PTEs on the basis of claims directed to formulations or other claim types that may be vulnerable under Otsuka FC. If the Full Federal Court’s interpretation is upheld, some existing extensions may be open to challenge or rectification, potentially bringing forward patent expiry and loss-of-exclusivity dates. To assess the scale of that potential exposure across the existing Australian PTE landscape, we undertook the empirical analysis described below.

Empirical analysis methodology

To assess the potential practical consequences of Otsuka FC, the claims of all Australian patents with a granted patent term extension that remained in force at the time of review were analysed using a combination of artificial intelligence-assisted review and human assessment.

Each patent was evaluated by reviewing the granted claims and considering whether the claimed invention aligned with the interpretation of “pharmaceutical substance per se” adopted by the Full Federal Court in Otsuka FC.

The patents were categorised into three groups:

• Low-risk: patents where the claims appeared directed to a new API, rather than to a formulation, dosage form, or delivery system and were therefore considered less likely to be affected by the Full Federal Court’s interpretation.
• High-risk: patents where the claims primarily related to pharmaceutical formulations, dosage forms, delivery systems, or other subject matter in which the claimed invention is not the API itself, and which would therefore be unlikely to satisfy section 70(2)(a) of the Act, if Otsuka FC is upheld.
• Uncertain: patents having claims that did not fall clearly within either of the above categories, but which remained potentially at risk depending on the High Court’s guidance as to the boundary between an eligible active pharmaceutical substance and other claim features.

Our analysis identified approximately 556 patents in the low-risk category, 130 patents in the high-risk category, and 145 patents classified as uncertain. These figures provide an indication of the potential scope of the issue, with over 270 patent term extensions that could potentially be deemed invalid, while recognising that the ultimate assessment of PTE eligibility will depend on the specific claims and factual circumstances of each patent through the lens of the High Court’s interpretation of the legislated “pharmaceutical per se” criterion.

Low-risk category

The majority of patents were classified as low risk because the claims were directed primarily to the active pharmaceutical ingredient or the pharmaceutical substance itself. These included, for example, claims directed to novel chemical compounds, biologics, antibodies, proteins, peptides, nucleic acids, and recombinant DNA products.

Examples include:

These examples focus on the identity and structure of the API itself and therefore represent claim types that appear less susceptible to challenge under the reasoning adopted in Otsuka FC.

High-Risk category

Patents classified as high risk generally included claims directed primarily to pharmaceutical formulations rather than the API itself. These included controlled-release dosage forms, depot formulations, excipient-defined compositions, delivery systems, and claims where the inventive contribution primarily resided in the formulation, not the API.

Examples include:

These claims focus on formulation characteristics, release profiles, stability or delivery mechanisms rather than the active pharmaceutical ingredient or active substance itself. Accordingly, they represent the types of claims most likely to be affected if the Full Federal Court’s interpretation is upheld.

Uncertain category

The uncertain category comprised patents having claims that did not fall clearly within the low or high-risk categories but remained potentially affected depending on how the High Court defines the boundary between an eligible API and other claim features.

This included claims in which physical-form, structural or compositional limitations might arguably characterise the active API itself, rather than merely a formulation or delivery feature.

Examples include:

When determining whether a claim encompasses a “pharmaceutical per se”, the answer is likely to depend on whether the claimed subject matter is viewed as the therapeutic substance itself (i.e., as a whole), or merely a delivery system for that substance. At present the Otsuka FC judgment does not clearly resolve all such boundary cases. For example, co-crystals could be characterised either as distinct solid-state forms or as combinations involving another component (i.e., a formulation). The same potentially applies to salt forms and prodrugs.

There is some disagreement as to the potential fate for patents focused on specific crystalline compounds (polymorphs), and isolated salt forms of an API. It may be argued that these chemical entities do not themselves constitute the relevant APIs because they undergo conversion into the relevant API after administration, and hence may be at risk in light of the Full Court's decision.

These examples identify claim types for which the High Court’s decision may materially affect classification. This is also importantly coupled with what specifically the claims of a patent are actually capturing (ensuring that it is consistent with at least one registered pharmaceutical product listed on the ARTG). Depending on the approach ultimately adopted, particular physical-form or compositional limitations may be treated as defining the API itself or, alternatively, as features that take the claim outside the eligible statutory category. Hopefully the High Court’s decision makes it clear whether these claim types would be eligible for PTE, whichever position they adopt.

Observations and practical implications

Our analysis indicates that about 70% of Australian patents currently benefiting from a granted patent term extension are unlikely to be affected by the Otsuka decision, as they appear to contain claims directed to an API or other active pharmaceutical substances per se. However, about 130 patents (~16%) are directed primarily to formulations, dosage forms, or delivery technologies and risk being invalidated if the Full Federal Court’s interpretation is ultimately affirmed.

A further group remains uncertain, because the line between the API and its formulation or delivery system is not always clear. This is particularly relevant for biologics, nucleic acid-based therapies, and advanced drug delivery technologies.

Conclusion

If the High Court confirms the Full Federal Court’s approach, pharmaceutical applicants will need to adopt more deliberate claim drafting and portfolio management strategies to ensure that patent portfolios include claims directed specifically to the API or other active pharmaceutical substance, or to a qualifying pharmaceutical substance produced by recombinant DNA technology. Existing PTEs that depend on formulation, dosage-form or delivery claims should be reviewed, particularly where commercial exclusivity assumptions rely on the validity of the extension.

Pharmaceutical patentees and applicants should therefore ensure that core therapeutic substances are adequately protected in both existing portfolios and future filing strategies and reassess potentially affected PTEs once the High Court provides further guidance.

Reach out to FB Rice if you have any questions regarding PTE requirements or potential implications resulting from the Otsuka FC and expected High Court decisions.