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

When you pick up a prescription, you might be handed a pill that looks completely different from the one your doctor prescribed. It might have a different color, shape, or even a different brand name on the label. But if it has the right TE code, it’s just as safe and effective as the original. That’s the power of Therapeutic Equivalence Codes - a hidden system that keeps millions of Americans on affordable medication without sacrificing quality.

What Are TE Codes and Why Do They Matter?

Therapeutic Equivalence Codes, or TE codes, are the FDA’s official way of saying: "This generic drug works just like the brand-name version." They’re not just labels - they’re science-backed guarantees. Every time a generic drug is approved in the U.S., the FDA evaluates it against the brand-name drug using strict criteria. If it passes, it gets a TE code that tells pharmacists and doctors it can be safely swapped.

The system started in 1984 after Congress passed the Hatch-Waxman Act. Before that, pharmacies didn’t have clear rules on which generics could be substituted. Some states allowed substitutions, others didn’t. Patients sometimes got different versions of the same drug from one refill to the next - with no way to know if they were truly interchangeable. TE codes fixed that. Now, every state in the U.S. uses the FDA’s Orange Book - the official list of approved drug products with therapeutic equivalence evaluations - as the legal standard for automatic generic substitution.

The result? Generics now make up over 90% of all prescriptions filled in the U.S. And they cost 80-85% less than brand-name drugs. In 2022 alone, Americans saved an estimated $2.2 trillion thanks to generic drugs approved under this system.

How TE Codes Work: The A and B System

Every TE code starts with a letter: A or B. That’s it. Simple, but powerful.

• A means the drug is therapeutically equivalent to the brand-name version. It has the same active ingredient, strength, dosage form, and route of administration. More importantly, it has been proven to work the same way in your body - same absorption, same effect, same safety profile.
• B means it’s not considered equivalent. This could be because the generic hasn’t been tested well enough, or because it’s a single-source product with no approved substitute.

But there’s more. The second letter adds detail. For example:

• AA = powder for oral solution (like some antibiotics)
• AN = injectable solution
• AP = powder for injection
• AT = topical cream

These codes aren’t random. They’re based on real data. To earn an “A” rating, a generic drug must pass three tests:

1. Pharmaceutical equivalence: Same active ingredient, same strength, same form (tablet, capsule, injection, etc.)
2. Bioequivalence: The drug gets into your bloodstream at the same rate and amount as the brand. The FDA requires the generic’s absorption to fall within 80-125% of the brand’s - a tight range proven to ensure identical clinical results.
3. Clinical equivalence: No meaningful difference in how the drug works in real patients. This is backed by studies and post-market monitoring.

What TE Codes Don’t Tell You

TE codes are reliable - but they’re not perfect. They were designed for simple, well-understood drugs. Things like blood pressure pills, antibiotics, or cholesterol meds. These are straightforward: one active ingredient, one clear effect.

But what about complex drugs? Like inhalers, topical creams, or injectables with multiple components? Here’s where the system shows cracks.

In 2019, the FDA pulled TE ratings for certain generic budesonide inhalers. Why? Even though they met all the lab tests, patients reported worse symptom control. The problem wasn’t the active ingredient - it was the way the drug was delivered. Tiny differences in the propellant or nozzle design changed how much medicine actually reached the lungs.

The same issue popped up with warfarin, a blood thinner with a narrow therapeutic index. Even tiny changes in absorption can be dangerous. Despite identical TE codes, some patients reported changes in their INR levels after switching generics. The FDA still lists these as equivalent - but many doctors now avoid automatic substitution for these drugs.

The system also doesn’t consider patient experience. A 2022 study found that 12.7% of patients felt their medication didn’t work the same after switching to a generic - even when clinical tests showed no difference. Sometimes it’s about how the pill tastes, how big it is, or just the psychological effect of a new pill. These aren’t medical issues, but they’re real to the person taking the drug.

How Pharmacists Use TE Codes Every Day

At the pharmacy counter, TE codes are the gatekeepers. When a prescription comes in for, say, Lipitor (atorvastatin), the pharmacist checks the Orange Book - either online or through their pharmacy software. If they see an “A” rating for the generic version, they can legally substitute it unless the doctor says “Dispense as Written” (DAW).

Most pharmacies use integrated systems like Epic or Cerner that automatically flag TE-rated generics. The process takes seconds. Pharmacy technicians are trained to recognize the codes. In fact, 98% of 2022 pharmacy graduates passed the NAPLEX exam with full understanding of TE codes.

And the system works. According to the National Community Pharmacists Association, 91% of pharmacists feel confident substituting TE-rated drugs. Patients rarely notice - unless they’re used to a specific pill shape or color.

But sometimes, the system glitches. State formularies don’t always update as fast as the FDA releases new Orange Book editions. In 2022, about 3.2% of substitutions were delayed because the pharmacy’s system hadn’t synced with the latest TE code changes. The FDA’s help desk handles around 1,200 questions a month to fix these issues.

Why TE Codes Are a Global Leader

The U.S. system is unique. In Europe, the EMA doesn’t have a standardized coding system. Each country decides on its own whether a generic can be substituted. In Canada, they use a similar concept but without the clear A/B labeling. Germany? Doctors have to approve every substitution.

The U.S. TE code system is the only one that’s:

• Centralized
• Legally binding across all 50 states
• Publicly accessible
• Updated regularly

That’s why it’s become the gold standard. Pharmacy benefit managers (PBMs), hospitals, and insurers all rely on it to control costs. In fact, 100% of major PBMs use TE codes to design their formularies - meaning they’ll only cover generics that have an “A” rating.

The Future of TE Codes

The FDA is working to improve the system. In 2022, they released new guidance to standardize how they evaluate complex drugs. They’re also testing ways to use real-world patient data - like electronic health records - to update TE ratings faster.

By 2024, they plan to extend TE codes to biosimilars - the next generation of biologic generics. And by 2027, they expect 93.4% of all prescriptions to be for TE-rated generics.

But the biggest challenge isn’t science - it’s perception. Some patients still believe generics are “inferior.” Doctors sometimes hesitate to switch, even when it’s safe. Education is key. The FDA runs monthly webinars for pharmacists. The American Pharmacists Association has a free TE code app with over 50,000 downloads.

What This Means for You

If you’re on a generic medication, chances are it has an “A” rating. That means it’s been tested, approved, and proven to work just like the brand. You’re saving money without sacrificing effectiveness.

But if you’re on a drug like warfarin, levothyroxine, or an inhaler - and you notice a change after switching - talk to your doctor. It’s not always the drug. Sometimes it’s the filler, the coating, or even your body adjusting. Your TE code doesn’t guarantee perfection - but it guarantees the best possible science has been applied.

The bottom line? TE codes are one of the most successful public health tools in modern medicine. They’ve made life-saving drugs affordable for millions. And as long as the FDA keeps updating them, they’ll keep working.