Substance Over Form(ulation)

Summary

In a landmark unanimous decision, the Full Court of the Federal Court of Australia in Otsuka Pharmaceutical Co Ltd v Sun Pharma ANZ Pty Ltd [2025] FCAFC 161 (Otsuka FC) held that patent claims directed to pharmaceutical formulations, such as controlled-release injectables combining an active ingredient with excipients, cannot form the basis for extending the term of a patent (PTE) under Australia's Patents Act; in essence holding that 'formulation patents' are not eligible for PTEs. 

The Full Court explicitly ruled that the term "pharmaceutical substance", a key term defining the scope of what claims can form the basis for a PTE, is limited to active substances, such as new chemical or biological entities, and that formulations do not fall within the scope of the definition. This overturns several prior first-instance decisions and sets a binding precedent for lower courts and the Australian Patent Office.

 

Background

Under Australian law, the standard term of a patent is 20 years. However, pharmaceutical patents may qualify for a PTE of up to 5 years if they meet specific criteria under the Patents Act (Cth), including:

1. The patent, in substance, discloses and claims:

a. one or more pharmaceutical substances per se; and/or

b. one or more pharmaceutical substances when produced by a process that involves the use of recombinant DNA technology; and

2. goods containing, or consisting of, the substance referred to in 1. must be included in the Australian Register of Therapeutic Goods; and

3. the period beginning on the date of the patent and ending on the first regulatory approval date for the substance must be at least 5 years; and

4. the term of the patent must not have been previously extended.

The Patents Act defines a "pharmaceutical substance" as:

"a substance (including a mixture or compound of substances) for therapeutic use whose application (or one of whose applications) involves:

(a) a chemical interaction, or physico-chemical interaction, with a human physiological system; or

(b) action on an infectious agent, or on a toxin or other poison, in a human body;

but does not include a substance that is solely for use in in vitro diagnosis or in vitro testing."

Prior to Otsuka FC, several first-instance Federal Court decisions addressed whether claims defined "one or more pharmaceutical substances per se" under s 70(2)(a) of the Patents Act. The core issue in those cases was whether the term "pharmaceutical substance" encompassed formulations combining active pharmaceutical ingredients (APIs) with excipients or other components.

In each case, the Federal Court held that formulation claims qualified as distinct "pharmaceutical substances per se", eligible for PTEs:

• Pharmacia Italia SpA v Mayne Pharma Pty Ltd [2006] FCA 305: The court assessed claim 1 of a patent covering a sterile, pyrogen-free anthracycline glycoside solution. Rejecting arguments that non-active elements disqualified it, the court affirmed its status as a pharmaceutical substance per se based on the active ingredient's therapeutic effect.

• Spirit Pharmaceuticals Pty Ltd v Mundipharma Pty Ltd [2013] FCA 658: The claims in dispute covered a controlled-release oxycodone matrix for sustained gastrointestinal release. The court upheld the PTE, identifying chemical interactions (excipient breakdown and oxycodone binding) as qualifying the formulation as a pharmaceutical substance per se.

• Cipla Australia Pty Ltd v Novo Nordisk A/S [2024] FCA 1414 (Cipla): The court assessed claim 1 of a patent covering an injectable liraglutide formulation. The PTE was upheld, holding that “pharmaceutical substance” includes formulations.

• Sun Pharma ANZ Pty Ltd v Otsuka Pharmaceutical Co Ltd [2025] FCA 44: A key issue for the court's determination was whether the PTE granted to Otsuka's patent for controlled release injectable formulations of aripiprazole (Abilify Maintena) qualified for extension by claiming eligible "pharmaceutical substances per se". The primary judge followed Cipla, holding that “pharmaceutical substance” includes formulations, though invalidating the PTE and claims on other grounds.

 

Otsuka FC

Although prior Full Court decisions examined aspects of Australia's PTE regime, Otsuka FC is the first to definitively construe the definition of "pharmaceutical substance" under the Patents Act.

The Full Court unanimously held invalid Otsuka's PTE for a controlled-release injectable aripiprazole formulation, holding that the term "pharmaceutical substance" is limited to active substances, such as new chemical or biological entities, and that formulations do not fall within the scope of the definition.

The Full Court's Approach

The Court reached the above conclusion after examining the statutory text, informed by context, purpose, earlier Full Court precedent, and the legislative history of the relevant provisions in the Patents Act as it evolved over time.

The Court held that the legislative history of the term extension regime showed that Parliament intended PTEs to compensate for the significant time and cost of the lengthy development and approval process for new chemical and biological entities, not formulations, balancing innovation against timely generic access. 

In arguing against this interpretation, Otsuka contended that if the legislature had intended “pharmaceutical substance” to be limited only to APIs, then the term "API" could have been used. The Full Court's answer to this was that the term "API", commonly used in the patent context to describe small molecules, is inapt to encompass all examples of substances that are "active", which the Court interpreted as "substances capable of interacting with a human physiological system in specified ways" or of "acting on certain harmful presences". The Full Court considered a broader term such as "pharmaceutical substance" was capable of encompassing all such therapeutically active substances.

The Full Court concluded that "pharmaceutical substance" is limited to active substances, excluding formulations, rendering Otsuka's claimed aripiprazole formulations ineligible for PTE under s 70(2) of the Patents Act.

In reaching this conclusion, the Full Court expressly overturned each of the abovementioned Federal Court decisions in respect of the finding that formulations qualified as a "pharmaceutical substance" under the Patents Act. The Full Court also affirmed the consistency of its findings with prior Full Court authorities, which did not directly address the meaning of "pharmaceutical substance".

 

High Court Appeal Status

Otsuka has until early January 2026 to apply for special leave to appeal the Otsuka FC decision to the High Court of Australia.

 

Key Takeaways

• Patentees should review granted PTEs and pending PTE applications to identify those relying on claims that are not to the active substance only. PTEs relying on formulation claims, particularly PTEs blocking generic entry, are most vulnerable in view of Otsuka FC. However, given the narrowed scope of "pharmaceutical substance", patentees should also be wary of potential challenges to granted PTEs and pending PTE applications relying on claims that are not to the active substance only.

• Pre-Otsuka FC, the Australian Patent Office granted PTEs for novel formulations of known drugs. The Patent Office, bound by Full Court precedent, will now reject them under s 70(2)(a) of the Patents Act. 

• In relation to granted PTEs, patentees should be aware that these can be removed from the Patents Register through rectification under s 119A of the Patents Act by the Commissioner of Patents, or by application from a third party, by reason of an entry wrongly existing in the Register or as an error or defect in an entry in the Register. Alternatively, third parties could seek orders for rectification of the Register in the Federal Court under s 192 of the Patents Act.

• Looking ahead, patentees should ensure that pharmaceutical patents include at least one claim directed to the active substance or substances, backed by enabling disclosure, to satisfy the narrowed term extension eligibility criteria and secure a PTE.