FDA Therapeutic Equivalency Codes: How Laws Determine Which Generic Drugs Can Be Substituted

When you pick up a prescription at the pharmacy, you might not realize that a legal system is silently deciding whether you get the brand-name drug or a cheaper generic version. That system? The FDA’s Therapeutic Equivalency (TE) Codes. These aren’t just technical labels-they’re the legal backbone of generic drug substitution across the United States. And they’re the reason your pharmacist can swap out a $200 brand-name pill for a $10 generic without asking your doctor again.

What Are Therapeutic Equivalency Codes, Really?

Therapeutic Equivalency Codes are alphanumeric ratings assigned by the FDA to prescription drugs that have multiple versions on the market. They tell pharmacists and doctors one thing: Can this generic be swapped for the brand without risking your health? These codes are published in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, better known as the Orange Book. First released in 1980 and dramatically expanded after the 1984 Hatch-Waxman Act, the Orange Book is updated every month and contains over 14,000 drug products.

The code itself has two parts. The first letter tells you the big picture: A means the generic is considered therapeutically equivalent to the brand-name drug. B means it’s not-either because bioequivalence hasn’t been proven, or there are unresolved safety concerns. The second letter adds detail about the drug’s form or specific issues. For example:

• AA: Immediate-release oral tablets or capsules with no bioequivalence issues.
• AB: Products that initially had bioequivalence questions but later proved equivalent through more data.
• BT: Topical creams or ointments with unresolved bioequivalence problems.
• BN: Nebulized aerosol products where delivery method makes testing harder.
• BX: No data exists to judge equivalence-so substitution isn’t allowed.

These aren’t arbitrary labels. Each code is based on strict scientific standards: identical active ingredients, same dosage form, same strength, and proven bioequivalence through clinical studies. The FDA doesn’t just assume generics work the same-they require proof.

How the Law Turns Science Into Substitution Rules

Here’s where science meets law. The FDA assigns TE codes, but it’s the states that decide whether pharmacists can actually substitute a generic for a brand-name drug. Every single U.S. state has laws that tie their substitution rules directly to the Orange Book.

In California, for instance, the Business and Professions Code Section 4073 says pharmacists can only substitute drugs with an A rating. In New York, the Office of the Professions mandates that pharmacists check the current Orange Book edition before swapping any medication. Even if a generic is FDA-approved, if it has a B code, substitution is illegal in most states.

This system exists because of the Hatch-Waxman Amendments of 1984. Before then, generic manufacturers had to run full clinical trials to prove their drugs worked. That was expensive and slow. Hatch-Waxman changed that by letting generics rely on the brand’s data-as long as they proved bioequivalence. That’s the foundation of the TE code system: if a generic matches the brand’s performance, it can be swapped. It’s not about cost-it’s about safety and consistency.

Why Some Generics Get an ‘A’ and Others Get a ‘B’

Not all generics are created equal-even if they contain the same active ingredient. A pill made by Company X might be rated AA, while a pill made by Company Y with the same ingredient gets a BA or even a BX. Why? Because of formulation differences.

Think of it like baking cookies. Two recipes might both use flour, sugar, and butter-but one uses a different type of butter, or bakes at a different temperature. The result can be different. The same goes for drugs. A generic version might use a different coating, filler, or release mechanism. If those changes affect how the drug is absorbed into your bloodstream, the FDA flags it with a B code.

This is especially true for complex drugs: inhalers, injectables, topical creams, and extended-release pills. For example, a generic asthma inhaler might have the same active ingredient as the brand, but if the propellant or particle size differs, it might not deliver the same dose to your lungs. That’s why many inhalers and topical products still carry B codes-even after years on the market.

According to the FDA’s 2023 data, 8,742 products have A codes, while 3,415 have B codes. That’s nearly a quarter of all listed generics that can’t be legally substituted in most states. The FDA is working to fix this. Their Complex Generic Drug Initiative has cut review times for tricky products from 34 months in 2018 to just 22 months in 2023.

What Happens When a Generic Has a ‘B’ Code?

If your prescription says “Dispense as Written” or the generic you’re offered has a B code, your pharmacist can’t switch it out-even if you ask. And they won’t. Most pharmacists are trained to check the Orange Book before dispensing any generic. A 2023 survey by the National Community Pharmacists Association found that 89% of independent pharmacists consider the Orange Book “essential” for daily work.

But here’s the catch: even if a drug has a B code, it’s still FDA-approved and legal to prescribe. It just can’t be substituted. So if your doctor prescribes a brand-name drug with a B generic available, you’ll get the brand unless you specifically request the generic and your insurance covers it.

Many patients don’t realize this. They assume “generic” means “substitutable.” But if the code is BT (topical) or BN (nebulizer), that’s not true. Pharmacists often avoid these products because of patient concerns-even if the science says they’re safe. A 2022 survey found that 68% of pharmacists were reluctant to substitute BT-rated topical products due to perceived clinical differences, even when the FDA deemed them equivalent.

The Real Impact: Billions Saved, But Barriers Remain

The TE code system has saved the U.S. healthcare system over $1.7 trillion since 1995. In 2022 alone, drugs with A codes generated $298 billion in savings. That’s money that went back into patients’ pockets, insurance premiums, and hospital budgets.

But the system isn’t perfect. In 2022, the FDA received 1,247 citizen petitions challenging TE codes-up 17% from the year before. Most came from brand-name companies trying to block generic competition, especially for complex drugs. These petitions delay approvals and keep prices high.

The FDA’s 2023-2027 Strategic Plan aims to reduce the number of B-coded products from 24.3% to under 15% by 2027. They’re investing $28.7 million through the Generic Drug User Fee Amendments (GDUFA) III to improve testing methods for complex delivery systems. Digital upgrades to the Orange Book now let EHR systems pull TE code data automatically, so doctors and pharmacists get real-time updates.

What You Need to Know as a Patient

You don’t need to memorize TE codes. But you should know this: if your prescription is filled with a generic, it’s because it passed the FDA’s strictest safety and effectiveness tests. If you’re handed a different generic than last time, that’s normal-different manufacturers can have different TE codes.

If you’re prescribed a drug with a B code and you’re unsure why you’re paying more, ask your pharmacist. They can check the Orange Book and explain why substitution isn’t allowed. If you’re switching from a brand to a generic and notice a change in how the drug works, tell your doctor. It’s rare, but formulation differences can matter in sensitive cases.

The system works because it’s grounded in science, enforced by law, and monitored daily by pharmacists. It’s not about cutting corners-it’s about making safe, affordable medicine accessible to everyone.