Otsuka v Sun Pharma: A Necessary Re-Adjustment to an Inequitable System…
The Full Federal Court decision in Otsuka Pharmaceuticals Co Ltd v Sun Pharma ANZ Pty Ltd [2025] FCAFC 161 (Otsuka) has caused a significant stir in the Australian pharmaceutical community. Briefly, the Otsuka decision concerning a controlled release aripiprazole product was handed down in December 2025. This decision found that formulation patents are not entitled to an Australian patent term extension. That is, only patents which claim active ingredients alone are eligible for a patent term extension (PTE). The decision overturned many years of case law, including the most recent case in Cipla Australia Pty Ltd v Novo Nordisk [2024] concerning the liraglutide product.
Otsuka Pharmaceuticals has been granted leave to appeal this decision to the Australian High Court, with a hearing scheduled for June this year. If the High Court upholds the decision of the Full Federal Court, it will change how the Australian Patent Office deals with granting extensions of term for pharmaceutical patents. It will also place previously granted patent term extensions for formulation patents liable to be revoked. . At the latest count, there are more than 200 formulation patents with a granted patent term extension in Australia that fall into this category. This possible eventuation is currently a hot topic in the Australian pharmaceutical community, with significant criticisms emanating from a number of interested players, including Medicines Australia (the leading industry body for originator pharmaceutical companies in Australia) and the Institute of Patent and Trade Marks Attorneys (IPTA). Whilst not surprising, these criticisms are perhaps looking at this decision through a narrow lens.
According to recent data, the pharmaceutical market in Australia is currently worth somewhere between US$15billion and US$30 billion, depending on how broadly ‘pharmaceutical market’ is defined. Whilst this pales in comparison to the US market, (US$500 – $700 billion in 2025, again depending on how the market is defined), the Australian market is growing much faster than the global average (usually around ≈ 5%), with a reported compound annual growth rate of 6.25%. This growth can be attributed to a multitude of factors including our growing and aging population (driving requirement for chronic disease treatments), high quality regulatory standards, subsidised medications via our Pharmaceutical Benefits Scheme (PBS), our R&D tax incentives and importantly, our generally stable economy.
According to the Australian Bureau of Statistics, the Australian population has grown by around 35% in the last 20 years, and roughly 24% of the total population is aged over 60. With such market growth (and more on the way) comes inevitable challenges, the biggest one being the cost. The uptake of generic and biosimilar products offers significant and much needed cost benefits. Yet, generic entry in Australia has and remains incredibly problematic, with the regulatory and patent systems heavily weighted in favour or the patentee. If we are to be taken seriously on the pharmaceutical world stage, we need an equally serious and fair patent system. The decision in Otsuka provides a step in this direction, a small adjustment to system heavily stacked in favour of the patentee.
The deck is stacked in favour of the patentee….
…and so it should be. This is particularly so in the case of pharmaceutical innovator companies. Robust and comprehensive patent protection is essential for attracting investment in pharmaceutical research, a sector renowned for its high rates of failure. Up to 90 % of drugs fail during the development phase. The standard 20-year patent monopoly (the exclusive right to exclude others), is critical for incentivising invention disclosure and compensating for significant financial investment in the research journey. Disclosure, in turn, can precipitate increased funding, investments and licensing opportunities, all critical to the drug development and commercialisation process. In order to thrive and advance as a society we need to support and reward innovation.
There are numerous provisions in the Australian patent and regulatory framework to support and benefit innovators in the pharmaceutical sector. All of these provisions present an obstacle to any generic entrant to the market:
Data Exclusivity
It is possible for a generic drug approval application to the Therapeutic Goods Administration to rely on the safety and efficacy data of an already approved product in Australia. There is however a time limitation as to when reliance on this data is possible.
Five years of data exclusivity is provided to any information filed by a pharmaceutical innovator in support of an application to register a product. That is, the data utilised in registering the product (whether that product is a small molecule or a biopharmaceutical) in Australia is deemed ‘prohibited information’ under the Australian Therapeutic Goods Act 1968 and cannot be used to register a generic version of that product for a period of five years.
Patent Term Extensions
Under the Australian patent term extension regime, an eligible pharmaceutical patent may be extended by up to 5 years, beyond its original 20-year life time. The regime is designed to compensate for the delays encountered during the registration process before the Australian Therapeutic Goods Administration.
At this stage (post Otsuka), compound patents (“API” patent), salt patents and polymorphs patents are all still eligible for an extension of term.
Preliminary Injunctions
A preliminary injunction (or sales stay) is a legal mechanism used by patentees to protect their market exclusivity. Such an injunction prevents launch of the generic or biosimilar, until the question of infringement has been resolved. From recent case law (Aflibercept: Regeneron Pharmaceuticals, Inc. v Sandoz Pty Ltd [2025] FCA 1067; Paliperidone: Janssen Pharmaceutica NV v Juno Pharmaceuticals Pty Ltd [2025] FCA 1538; Dapagliflozin: AstraZeneca AB v Pharmacor Pty Ltd [2026] FCA 88), unless there is a reasonable non-infringement position put forward, grant of a preliminary injunction is more likely than not.
Post-Grant Claim Amendments
Applications to amend patent claims can be made at any point throughout the patent lifetime. Post grant amendments are usually allowable providing the amendment falls in substance within the ‘scope the claims of the specification before amendment’. That is, the amendment cannot extend the scope of the claim as granted. Post grant amendments to claims can be a useful tool when preparing to enforce a patent or to clarify a particular detail of the invention. Overall, Australia takes a relatively liberal approach to post-grant claim amendments.
Patentable Subject Matter and Patentability Thresholds
With respect to pharmaceutical inventions, patents to products (active ingredients, salts, polymorphs, crystalline or co-crystals thereof), compositions, formulations, as well as methods of making and using products are all available. The presentation of a therapeutic claim is also flexible with most language forms being permissible, including ‘Swiss-style’ claims: “use of [compound] for the manufacture of a medicament for treating a [condition].”
PBS – Government Subsidised Drugs
The PBS is part of the National Medicines Policy in Australia. It aims to ensure that all Australians have access to necessary medicine at an affordable cost. Drugs listed on the PBS Schedule are available to be dispended at a heavily subsidised price. Currently, the general patient charge for any drug listed on the PBS is $25. The actual cost can be significantly higher. For example, the cost of Keytruda (pembrolizumab) for the treatment of non-small cell lung cancer, can be >> $14,000 per injection. However, the patient will only ever pay $25, with the Australian government picking up the balance.
But perhaps we need a more balanced deck…
In the 2024 – 2025 financial year, government expenditure for the PBS was AU$19.1 billion, over 226 million subsidised prescriptions. Of this total amount, patients contributed AU$1.7 billion, leaving a shortfall of AU$17.4 billion (https://www.pbs.gov.au/info/statistics/expenditure-prescriptions/expenditure-prescriptions-report-1-july-2024-30-june-2025). More than 60 % of this cost can be attributed to Australian over the age of 60. As our population continues to grow and age, we must strike a balance if we are to continue to provide access to high quality pharmaceutical products at affordable prices. We must encourage uptake of generic and biosimilar products. If there are more generic and biosimilar products, there are more savings and therefore more money to subsidise more access to affordable medications. A more balanced system, to benefit everyone.
A balanced and equitable patent and regulatory system?
The decision in Otsuka to disallow patent term extension for pharmaceutical formulations patents, is a well-reasoned and thorough decision, headed up by three distinguished IP judges. If we can put aside the politics of the Otsuka decision we can perhaps focus on what it achieves for us as a nation. A nation dedicated to creating policies that benefit society as a whole. The decision pushes the scales ever so slightly away from the patentee and removes just one of a multitude of barriers standing in the way of a generic entrant. In order to create easier and more affordable access to essential lifesaving medications, this is a step in the right direction. A small but necessary re-adjustment to an inequitable system. Advance Australia Fair.
