Therapeutic Equivalence Codes: How the FDA Determines If Generic Drugs Can Be Substituted

When your pharmacist hands you a generic pill instead of the brand-name drug your doctor prescribed, you might wonder: is this really the same thing? It’s not just a labeling change. There’s a whole science behind it-and the U.S. Food and Drug Administration has built a system to make sure you’re not getting a different drug by accident. That system is called therapeutic equivalence (TE) codes, and they’re printed right in the FDA’s Orange Book, the official guide that tells pharmacists which generics can be swapped in without changing your treatment.

What Therapeutic Equivalence Codes Actually Mean

Therapeutic equivalence isn’t about price or packaging. It’s about whether two drugs-brand and generic-do the exact same thing in your body. The FDA says a generic is therapeutically equivalent if it has the same active ingredient, strength, dosage form, and route of administration as the brand-name drug, and if it’s been proven to work the same way in your bloodstream. That’s called bioequivalence. But it’s not enough to just match ingredients. The drug has to be absorbed at the same rate and to the same extent. If it isn’t, you could get too little of the medicine-or too much.

That’s where TE codes come in. They’re a shorthand system the FDA uses to tell pharmacists, doctors, and state boards: yes, this generic can be swapped, or no, don’t substitute this one without checking. The code is usually one or two letters. The first letter is the most important.

The A and B Codes: The Core of Substitution Rules

If a generic drug has an A as its first letter, it’s rated as therapeutically equivalent. That means the FDA has confirmed it can be substituted for the brand-name version without any expected difference in safety or effectiveness. Most generics you’ll see at the pharmacy have an A rating. In fact, over 90% of the 14,000+ drugs listed in the 2023 Orange Book have an A code.

But not all A codes are the same. Some have numbers after them, like AB1, AB2, or AB4. These tell you which brand-name drug the generic was tested against. If a drug has multiple brand-name versions (called Reference Listed Drugs), the FDA assigns different AB numbers to match each one. For example, if Generic X was tested against Brand A and Generic Y was tested against Brand B, they’ll be AB1 and AB2-even if both are equally effective. Pharmacists need to match the AB number to the prescription to make sure they’re substituting correctly.

Then there are the B codes. These are red flags. A B rating means the FDA doesn’t yet have enough evidence to say the generic is interchangeable. It might be a complex product-like an inhaler, a topical cream, or an extended-release capsule-where standard bioequivalence tests don’t capture how the drug behaves in the body. Or it might be a product with known issues, like inconsistent absorption or formulation problems.

B codes come with suffixes: BC for complex extended-release forms, BT for topical products with absorption issues, BN for aerosol nebulizers, BX for not enough data. These aren’t necessarily unsafe. They just mean the FDA can’t guarantee substitution will work the same way every time. That’s why pharmacists are often required to check with the prescriber before swapping a B-rated drug.

Why the System Exists: Safety, Savings, and Simplicity

The TE code system wasn’t created to make pharmacy life easier-it was created to save lives and money. Before the Orange Book, pharmacists had no reliable way to know if a generic was truly interchangeable. Some were, some weren’t. Patients got inconsistent results. The Hatch-Waxman Act of 1984 changed that. It gave the FDA the authority to evaluate generics scientifically and assign these codes.

Today, 90% of prescriptions in the U.S. are filled with generics. But they only cost 23% of what brand-name drugs do. That’s over $370 billion saved every year-money that goes back into the system, into patients’ pockets, and into healthcare access. The TE code system makes that possible. Without it, pharmacists would have to guess. Doctors would have to approve every substitution. Pharmacies would slow down. Costs would rise.

Forty-nine states allow pharmacists to substitute A-rated generics without asking the doctor. Only one state requires prior approval for every swap. That’s because the FDA’s codes are trusted. In a 2022 survey of 1,200 community pharmacists, 87% said TE codes make substitution faster and safer. Pharmacists check the Orange Book an average of 2.7 minutes per prescription-time well spent, since it prevents errors.

Where the System Falls Short

For simple pills-like metformin or lisinopril-the TE code system works perfectly. But for complex drugs, it’s struggling.

Take topical creams. Two creams might have the same active ingredient and concentration. But if one uses a different base (the fatty substance the drug is mixed into), the skin might absorb it differently. The FDA’s standard bioequivalence tests, designed for pills in the bloodstream, don’t capture that. So even if the cream works fine for patients, it might get a BT code. That means the pharmacist can’t swap it, even if the doctor knows it’s safe.

Same with inhalers. A generic asthma inhaler might have the same dose of albuterol-but if the propellant or spray mechanism is slightly different, the lung delivery changes. The FDA doesn’t have a clear method to test that yet. So many of these products get B ratings, even when they’re clinically equivalent.

A 2022 American Medical Association survey found that 42% of doctors are confused by B codes. Some think “B” means “unsafe.” Others think it means “not effective.” Neither is true. A B-rated drug might be just as good-it just hasn’t been proven interchangeable under current FDA rules. This leads to mistakes: pharmacists refusing substitutions they should make, or worse, doctors avoiding generics altogether out of fear.

What’s Changing in 2025

The FDA knows the system needs updating. In 2022, they released a draft guidance to improve how they evaluate complex generics. They’re working on new testing methods for inhalers, injectables, and topical products-methods that look at real-world patient outcomes, not just blood levels.

They’ve also expanded their Product-Specific Guidances (PSGs) to over 1,850 drugs. These are detailed roadmaps for manufacturers: “Here’s exactly how to prove your generic version of this drug works.” More PSGs mean more A ratings for complex products.

The goal? Reduce B-rated products for complex generics by 30% by 2027. That’s not just a number-it’s a promise to patients that more generics will be trusted, more substitutions will be automatic, and more people will get affordable medicine without risk.

What You Should Do

If you’re a patient: Don’t panic if your generic has a B code. Ask your pharmacist: “Is this safe to take instead of the brand?” They can tell you if it’s been used successfully by others, or if your doctor should be consulted. If you’ve had a bad reaction to a generic, report it. That data helps the FDA improve the system.

If you’re a prescriber: Know the difference between “B” and “unsafe.” Don’t automatically write “dispense as written” on every prescription. Let pharmacists do their job. For simple drugs, trust the A code. For complex ones, use your clinical judgment.

If you’re a pharmacist: Always check the Orange Book before substituting. Know the AB numbers. Don’t assume a B-rated drug can’t be used-it might be the best option for your patient. But don’t substitute it without confirming with the prescriber if your state requires it.

Final Thoughts

Therapeutic equivalence codes aren’t perfect. But they’re the best system we have-and they work. They’ve made generic drugs safe, reliable, and widely available. They’ve saved billions. They’ve kept people on their medications because they could afford them.

The future of this system isn’t about more codes. It’s about smarter ones. As science catches up with complex drugs, the FDA will update its rules. Until then, the A code remains your guarantee. And the B code? It’s not a stop sign. It’s a caution light. Slow down. Ask questions. Make sure.