FDA Therapeutic Equivalency Codes: How Laws Determine If Generics Can Be Substituted

When you pick up a prescription, you might not realize that a single letter on a government database could decide whether you get the brand-name drug or a cheaper generic. That letter is part of the FDA’s Therapeutic Equivalency (TE) Code system - a legal tool that tells pharmacists exactly which generics can be swapped in without risking your health. It’s not about price. It’s not about marketing. It’s about science, law, and whether two pills will do the same thing in your body.

What TE Codes Really Mean

The FDA doesn’t just approve generics and call it a day. Every multisource prescription drug in the U.S. gets a code - usually two characters - that tells you whether it’s interchangeable with the brand-name version. This system is published monthly in the Approved Drug Products with Therapeutic Equivalence Evaluations, better known as the Orange Book. It’s the law’s official reference for substitution.

The first letter is the key:

• A means the generic is therapeutically equivalent to the brand. It can be substituted.
• B means it’s not. The FDA hasn’t confirmed it works the same way.

The second letter adds detail. For example:

• AA = immediate-release oral drug, no issues. Safe to swap.
• AB = originally had questions, but later proven equivalent.
• BT = topical product with bioequivalence concerns. Don’t substitute without checking.
• BN = aerosol or nebulizer delivery. Hard to test, often flagged.

These aren’t random labels. They’re based on strict criteria: identical active ingredients, same dosage form, same strength, and proven bioequivalence. That means the generic must deliver the same amount of drug into your bloodstream at the same rate as the brand. The FDA tests this with clinical studies, not just lab models.

Why the Law Forces Pharmacists to Follow the Orange Book

You might think a pharmacist can just swap any generic for any brand. But that’s not true. Every state has pharmacy laws - and all of them tie directly to the FDA’s TE codes.

Take California. Its Business and Professions Code Section 4073 says pharmacists can substitute only if the generic has an A code. In New York, the Education Department requires pharmacists to check the latest Orange Book before swapping. Even if the pharmacist thinks the generic is fine, they can’t legally substitute a B-rated product.

This isn’t just bureaucracy. It’s a legal shield. If a patient has a bad reaction after a substitution, the pharmacy could be sued. The Orange Book gives them a clear, federal standard to follow. No guesswork.

And here’s the catch: two generics of the same drug can have different codes. Say you have a generic version of a blood pressure pill. One might be rated AA. Another, made by a different company with a slightly different filler or coating, might be AB. Both are approved. Both are legal. But only the AA one can be automatically substituted in most states. The AB one? It’s still approved - just not automatically interchangeable.

What Happens When a Drug Gets a B Code

A B code doesn’t mean the drug is unsafe. It means the FDA doesn’t have enough proof that it works exactly like the brand. This happens most often with complex drugs:

• Topical creams (like cortisone or antifungal ointments)
• Inhaled medications (asthma inhalers, nebulizers)
• Extended-release pills (that release drug slowly over hours)
• Injectables with complex formulations

For these, measuring bioequivalence is hard. How do you prove a cream absorbs the same way through skin? Or that an inhaler delivers the same particle size to the lungs? Traditional blood tests don’t work. The FDA is still figuring out the best methods.

In 2022, 94.7% of all generic prescriptions filled in the U.S. were for A-rated drugs. That means only 5.3% were B-rated - and most of those were for complex products. Pharmacists report being hesitant to substitute even when the law allows it. A 2023 survey found 68% of pharmacists avoid swapping BT (topical) or BN (nebulized) products because they’re unsure about clinical outcomes.

That’s why brand-name companies sometimes fight hard to keep B codes. In 2022, the FDA received 1,247 citizen petitions challenging TE codes - up 17% from 2021. Most came from manufacturers trying to block generics from getting A ratings.

The Real Impact: Billions in Savings - and Barriers to Access

The TE code system isn’t just about safety. It’s about cost.

Since 1995, generic drugs approved under this system have saved the U.S. healthcare system over $1.7 trillion. In 2022 alone, A-rated generics saved $298 billion. That’s money patients, insurers, and taxpayers didn’t have to spend.

But here’s the problem: if a drug stays stuck with a B code, it can’t be substituted. That means patients keep paying full price for the brand. Even if the generic is approved and cheaper, pharmacists can’t switch it out. That’s why the FDA launched the Complex Generic Drug Initiative in 2023.

Their goal? Reduce the number of B-rated products from 24.3% of all listed drugs to under 15% by 2027. They’re investing $28.7 million under GDUFA III to develop better testing methods - especially for inhalers, creams, and extended-release pills.

In October 2023, the FDA released a draft guidance on how to prove therapeutic equivalence for these tricky products. It’s a big deal. If successful, dozens of drugs currently stuck with B codes could get upgraded to A - opening the door to automatic substitution and lower prices.

What Patients and Providers Need to Know

If you’re prescribed a generic:

• Ask your pharmacist: “Is this rated A or B in the Orange Book?”
• If it’s B, find out why. Is it because the FDA hasn’t tested it yet? Or because there’s a known issue?
• Don’t assume all generics of the same drug are the same. Two different brands may have different codes.
• If your insurance only covers generics, but your drug has a B code, ask your doctor if another A-rated version exists.

Doctors and pharmacists rely on the Orange Book daily. It’s updated monthly. You can’t find this info on drug labels. You need to check the FDA’s official site or ask your pharmacist to pull up the current listing.

And if you’ve been told you can’t get a generic because “it’s not the same”? That might be true - but only if it’s rated B. If it’s rated A, you’re getting the same medicine, legally and scientifically.

What’s Next for TE Codes?

The FDA is modernizing the Orange Book. As of January 2023, it’s now available via API - meaning electronic health records can pull TE codes automatically. That means fewer errors, faster checks, and better integration into pharmacy systems.

The push to convert B codes to A is accelerating. Experts predict that by 2028, 93% of all generic prescriptions will be for A-rated drugs. That’s not just progress - it’s a shift in how we think about generic drugs.

The bottom line? Therapeutic Equivalency Codes are not a suggestion. They’re the law. And they’re designed to let you save money - without risking your health. The system works because it’s based on science, enforced by regulation, and backed by state law. It’s one of the most effective tools we have to make medicine affordable - without compromising safety.