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

When you pick up a prescription, you might not notice the difference between the brand-name pill and the generic one sitting in your bag. But behind that switch is a complex, science-backed system called Therapeutic Equivalence Codes-or TE Codes. These codes tell pharmacists exactly which generic drugs can be safely swapped for brand-name versions without changing how well the medicine works. It’s not guesswork. It’s not opinion. It’s a federal standard that saves billions every year and keeps millions of Americans on affordable treatment.

What Are TE Codes and Why Do They Matter?

Therapeutic Equivalence Codes are assigned by the U.S. Food and Drug Administration (FDA) and published in the Approved Drug Products with Therapeutic Equivalence Evaluations, better known as the Orange Book. First introduced in 1984 after the Hatch-Waxman Act, these codes were created to solve a real problem: pharmacists didn’t have clear rules on which generics could be substituted. Some states allowed it, others didn’t. Doctors were confused. Patients got mixed results.

The solution? A standardized system where every multi-source drug-meaning any medicine with more than one manufacturer-is evaluated and given a code. That code tells you if the generic is a true substitute. The most common code is AA. That means the generic has the same active ingredient, same strength, same dosage form, and has been proven to work the same way in your body as the brand-name drug. If you see a B code, you don’t substitute. It’s not equivalent.

This system isn’t just paperwork. It’s the reason 90% of all prescriptions filled in the U.S. today are generics. And they cost 80-85% less. A 30-day supply of Lipitor (atorvastatin) might run $150 brand-name. The generic? Around $10. That’s not a marketing claim-it’s a TE Code guarantee.

How the FDA Decides If a Generic Is Equivalent

The FDA doesn’t just look at the ingredients. They dig deep. To earn an ‘A’ rating, a generic must pass three tests:

• Pharmaceutical equivalence: Same active ingredient, same strength, same form (tablet, capsule, injection, etc.), same route of administration.
• Bioequivalence: The generic must deliver the same amount of medicine into your bloodstream at the same rate as the brand. That’s measured using blood tests called AUC and Cmax. The FDA requires the generic’s results to fall within 80-125% of the brand’s. That’s not a wide margin-it’s tight.
• Clinical equivalence: No meaningful difference in safety or effectiveness under real-world use. This is where the Orange Book gets its authority. If two drugs have the same TE code, they’re treated as interchangeable in every state.

These aren’t theoretical standards. Manufacturers must submit real data from human studies. For example, a generic version of levothyroxine (Synthroid) must show it absorbs the same way in patients with hypothyroidism. If it doesn’t, it gets a ‘B’ code-or worse, it’s rejected.

Understanding the TE Code Letters

The code looks simple-just two or three letters-but each one carries meaning. The first letter is always A or B.

• A = Therapeutically equivalent. Safe to substitute.
• B = Not equivalent. Don’t substitute without doctor approval.

The second letter tells you the type of product and why it’s rated that way. Common ones include:

• AA = Oral solution, powder for oral solution
• AN = Injectable solution
• AO = Oral solution
• AP = Powder for injection
• AT = Topical cream or ointment

For example, the generic version of albuterol inhalers used to carry an AA code. But in 2019, the FDA pulled that rating after reports showed some generics didn’t deliver the right dose to the lungs. That’s rare-but it shows the system works. When evidence changes, the code changes.

How Pharmacists Use TE Codes Every Day

In a busy pharmacy, a technician pulls up a prescription. The doctor wrote “Lisinopril 10 mg.” The brand is Zestril. But the patient’s insurance only covers generics. The pharmacist checks the Orange Book-online or built into their pharmacy software-and sees the generic has an AP code. That means it’s an approved, equivalent substitute.

The pharmacist swaps it. No call to the doctor. No paperwork. Just a quick lookup. That’s the power of TE Codes. According to the National Community Pharmacists Association, 91% of pharmacists feel confident making these substitutions because the system is clear and consistent.

It’s not just convenience. It’s compliance. Every state in the U.S. has laws that require pharmacists to substitute generic drugs when the TE Code says it’s allowed. Only if the doctor writes “Dispense as Written” or “Do Not Substitute” does the pharmacist have to give the brand.

Where TE Codes Fall Short

Despite their success, TE Codes aren’t perfect. They don’t cover everything.

Narrow therapeutic index (NTI) drugs are the biggest concern. These are medicines where even tiny changes in blood levels can cause harm or reduce effectiveness. Warfarin (Coumadin), levothyroxine, and some seizure meds fall into this category. The FDA says TE-rated generics are still safe-but some patients report feeling different after switching, even when lab results look fine. A 2022 study found 12.7% of patients perceived a difference after switching between TE-rated generics. That doesn’t mean the drug didn’t work-it means their body reacted differently to the inactive ingredients, or the timing of absorption shifted slightly.

Complex products like inhalers, patches, and topical creams are also tricky. The active ingredient might be the same, but how it’s delivered can vary. A generic inhaler might deliver less medicine to the lungs than the brand, even if blood levels look normal. That’s why the FDA has pulled TE ratings for certain generic budesonide inhalers and is now working on new codes for these products.

And TE Codes don’t consider individual patient factors. A 70-year-old with kidney disease might metabolize a drug differently than a 30-year-old. The code doesn’t know that. That’s why doctors still need to be involved in complex cases.

What Experts Say About TE Codes

The system has strong support. Dr. Janet Woodcock, former head of FDA’s drug center, called TE Codes “one of the most successful public health initiatives of the past four decades.” Since 1995, they’ve saved over $2.2 trillion in healthcare costs.

The American College of Clinical Pharmacy calls them the “gold standard.” But even supporters admit there’s room to grow. Dr. Jerry Avorn from Harvard says TE Codes can oversimplify things, especially for NTI drugs. He’s not against generics-he just wants more precision.

The FDA agrees. In 2022, they updated their guidance to make TE evaluations more consistent. They’re also testing ways to use real-world patient data-like electronic health records-to supplement lab studies. And by 2024, they plan to extend TE Codes to biosimilars, which are complex biologic drugs that mimic brand-name biologics like Humira.

Real Patient Experiences

Most patients never think twice about TE Codes. They just get their meds cheaper. On GoodRx, generic substitutions for blood pressure and diabetes meds have 4.7 out of 5 stars based on over 2,300 reviews.

But some patients report issues. On Drugs.com, nearly 90 people wrote about problems switching warfarin generics. One man said his INR levels spiked after switching brands-even though both had the same TE code. His doctor had to adjust his dose. That’s not common, but it happens.

The takeaway? TE Codes are reliable for most people, most of the time. But if you feel different after a switch-fatigue, dizziness, changes in mood or symptoms-tell your doctor. It’s not the code’s fault. It’s your body’s signal.

The Bigger Picture: Cost, Access, and the Future

TE Codes are the backbone of the $130 billion U.S. generic drug market. They’ve slashed brand-name market share. Within six months of a generic launch, the brand keeps only about 23.5% of sales-if it has a TE rating. Without one? It holds onto 41.7%.

Pharmacy benefit managers, hospitals, and insurers all rely on TE Codes to design formularies. If a drug doesn’t have an ‘A’ code, it’s often excluded from coverage. That’s not a loophole-it’s intentional. It pushes manufacturers to prove their generics work.

Looking ahead, TE-rated generics will make up 93.4% of all prescriptions by 2027, according to Evaluate Pharma. The Congressional Budget Office estimates TE Codes will save $1.2 trillion more between 2023 and 2032.

The system isn’t broken. It’s evolving. And for now, it’s the best tool we have to make sure safe, affordable medicine reaches everyone.