Therapeutic Equivalence Codes (TE Codes) Explained: How Generic Drugs Are Approved and Substituted

When you pick up a prescription for high blood pressure or cholesterol, you might be handed a small white pill with no brand name on it. That’s not a mistake-it’s the system working as designed. Behind that generic pill is a detailed, science-backed rating called a Therapeutic Equivalence Code (TE Code). These codes tell pharmacists whether it’s safe to swap your brand-name drug for a cheaper generic version. And they’re why Americans save billions every year without risking their health.

What Are TE Codes and Why Do They Matter?

Therapeutic Equivalence Codes are the FDA’s official way of saying, ‘This generic drug works just like the brand-name version.’ They’re published in the Approved Drug Products with Therapeutic Equivalence Evaluations, better known as the Orange Book. First created in 1984 after the Hatch-Waxman Act, TE Codes were built to fix a messy problem: pharmacists didn’t know which generics could be safely swapped. Some states allowed substitution, others didn’t. Patients got different pills from different pharmacies. Doctors were confused. The system needed clarity.

Today, every multi-source drug approved in the U.S. gets a TE Code. If it’s rated ‘A,’ it’s interchangeable. If it’s ‘B,’ it’s not. That’s it. No guesswork. No legal gray areas. This system lets pharmacists automatically substitute generics unless the doctor says no. It’s simple, standardized, and legally binding in all 50 states.

How TE Codes Work: The A and B System

Every TE Code starts with a letter: A or B. That’s the core decision.

• A means the generic is therapeutically equivalent to the brand. It has the same active ingredient, dose, strength, route of administration, and-most importantly-it’s been proven to work the same way in your body.
• B means the FDA doesn’t consider it equivalent. This could be because the generic doesn’t absorb the same way, or because there’s not enough data to prove it works the same.

But it doesn’t stop there. The second letter adds detail. For example:

• AA = Powder for oral solution (like some antibiotics)
• AN = Injectable solution
• AT = Topical cream
• AP = Powder for injection

These letters help pharmacists and doctors know exactly what kind of product they’re dealing with. A generic insulin pen and a generic inhaler might both be rated ‘A,’ but their second letters tell you they’re not the same type of delivery system.

The FDA doesn’t just look at the ingredients. They require proof that the generic drug is pharmaceutically equivalent (same ingredients, same form) and bioequivalent (your body absorbs it at the same rate and amount). To prove bioequivalence, manufacturers must run studies showing the generic’s absorption levels fall within 80-125% of the brand’s. That’s not a guess-it’s a strict, science-based range backed by clinical data.

Why TE Codes Save Money-Without Sacrificing Safety

Generic drugs cost 80-85% less than brand-name versions. That’s not marketing. That’s fact. In 2022, the FDA reported that generics saved the U.S. healthcare system over $2.2 trillion since 1995. That’s more than the GDP of most countries.

But here’s the key: those savings don’t come from cutting corners. The FDA requires generics to meet the same quality standards as brand-name drugs. The same factories often make both. The same inspectors check them. The same testing applies.

Take atorvastatin, the generic for Lipitor. A 2021 study in JAMA Internal Medicine tracked over 10,000 patients switching from brand to generic. The results? Identical drops in LDL cholesterol. No increase in heart attacks. No rise in side effects. That’s the power of TE Codes. They don’t just say ‘it’s cheaper’-they prove ‘it’s just as good.’

Where TE Codes Fall Short

TE Codes are powerful, but they’re not perfect. They were built for simple pills-tablets, capsules, liquids. They struggle with complex products.

Take inhalers. Two generic budesonide inhalers might have the same active ingredient and meet bioequivalence standards. But if the spray pattern, particle size, or nozzle design is slightly different, the drug might not reach the lungs the same way. In 2019, the FDA pulled TE ratings for certain generic inhalers after reports of inconsistent performance. The code said ‘A,’ but patients weren’t getting the same benefit.

Same goes for narrow therapeutic index (NTI) drugs-medications where even tiny changes in blood levels can cause harm. Warfarin (a blood thinner), levothyroxine (for thyroid), and some seizure meds fall into this category. Patients often report feeling different when switching between generics-even if they have the same TE rating. A 2022 study in The American Journal of Managed Care found 12.7% of patients felt something changed after switching. Clinical tests showed no difference. But perception matters. If a patient thinks the generic isn’t working, they might stop taking it.

The FDA admits this. Their 2022 guidance says TE evaluations are ‘product-specific’ and don’t guarantee equivalence in every clinical scenario. That’s why doctors can still write ‘Do Not Substitute’ on prescriptions. And why some patients stick with brand names-even if they cost more.

How Pharmacists Use TE Codes Every Day

For pharmacists, TE Codes are routine. When a prescription comes in for a brand-name drug, the pharmacy system automatically checks the Orange Book. If a generic with an ‘A’ rating is available, the system flags it. The pharmacist then dispenses the generic unless the patient refuses or the prescriber blocked substitution.

It takes less than 30 seconds. According to the Pharmacy Technician Certification Board, 89% of pharmacy techs say verifying TE codes adds almost no time to their workflow. And 98% of 2022 pharmacy graduates passed their licensing exam on TE Code interpretation.

Most systems-Epic, Cerner, and others-integrate the Orange Book directly. You don’t need to look up a book. The code appears right on the screen. In fact, 100% of major pharmacy benefit managers (PBMs) use TE Codes to decide which drugs to cover. Hospitals use them to standardize what’s stocked in their formularies. Insurance companies use them to push generics.

And patients? A 2022 survey by the National Community Pharmacists Association found 91% of pharmacists have high confidence in substituting TE-rated generics. On GoodRx, generic substitutions for chronic conditions like diabetes and hypertension have a 4.7/5 rating based on over 2,300 reviews.

What’s Next for TE Codes?

The system isn’t frozen. The FDA is working on updates.

In 2024, they plan to expand TE Codes to cover biosimilars-biologic drugs that mimic complex proteins like Humira or Enbrel. These aren’t simple pills. They’re made from living cells. Proving equivalence is harder. But the FDA is building new criteria.

They’re also testing whether real-world patient data-like electronic health records and insurance claims-can help refine TE ratings. If a generic version of a drug is linked to fewer hospital visits in real life, should that count? The FDA is exploring that.

By 2027, analysts expect 93.4% of all prescriptions in the U.S. to be for TE-rated generics. That’s up from 90.1% today. The goal isn’t just cost savings. It’s consistency. Patients should get the same outcome, no matter which pharmacy they visit or which generic they’re given.

What You Should Know as a Patient

You don’t need to memorize TE codes. But you should understand this:

• If your pharmacist gives you a generic, it’s because the FDA says it’s safe to swap.
• If you feel different after switching, tell your doctor. It might be nothing-but it might not be.
• For critical drugs like warfarin or thyroid meds, ask if your generic has an ‘A’ rating. Some patients prefer to stick with one brand.
• TE Codes don’t apply to single-source generics (drugs with no competition). Those are rare, but they exist.

Bottom line: TE Codes are one of the most successful public health tools in modern medicine. They’ve made generics the norm, not the exception. They’ve saved trillions. And they’ve done it without sacrificing safety.

Next time you get a generic prescription, know this: behind that little pill is a decade of science, thousands of tests, and a system designed to protect you-while keeping your bill low.