FDA Therapeutic Equivalency Codes: How Laws Determine If You Can Swap Generic Drugs

When your pharmacist hands you a generic pill instead of the brand-name version, you might not think twice. But behind that simple swap is a complex legal and scientific system built by the FDA to make sure you get the same effect-safely and reliably. This system is called Therapeutic Equivalency (TE) Codes, and it’s the reason most generic drugs in the U.S. can be legally substituted without your doctor’s approval.

What TE Codes Really Mean

Therapeutic Equivalency Codes are not just labels. They’re legal determinations. The FDA assigns them to multisource prescription drugs based on whether a generic version can be swapped for the brand-name drug without changing how well it works or how safe it is. These codes are published in the Approved Drug Products with Therapeutic Equivalence Evaluations, better known as the Orange Book. It’s updated every month, and every pharmacist in the country is expected to check it before substituting a drug.

The code itself is one or two letters. The first letter tells you the big picture:

• A means the generic is considered therapeutically equivalent to the brand-name drug. You can swap it with confidence.
• B means there are unresolved issues-bioequivalence problems, formulation differences, or lack of data. Pharmacists are generally not allowed to substitute these without a doctor’s order.

The second letter adds detail. For example:

• AA is the gold standard: immediate-release oral pills with no bioequivalence concerns.
• AB means the product had initial issues but later proved equivalent after more testing.
• BT is for topical creams or gels with bioequivalence uncertainties.
• BN is for aerosol nebulizer products-hard to test, harder to substitute.

These aren’t arbitrary. They’re based on strict criteria: same active ingredient, same strength, same dosage form, same route of administration, and proven bioequivalence through clinical studies. The FDA doesn’t just assume generics work the same. They require data.

How the Law Makes Substitution Possible

The legal backbone for TE codes comes from the Hatch-Waxman Act of 1984. Before this law, generic drugs faced huge barriers. Companies had to repeat the same expensive clinical trials as brand-name makers, even if the active ingredient was identical. Hatch-Waxman changed that by creating the Abbreviated New Drug Application (ANDA) pathway. Now, generic manufacturers only need to prove their product is bioequivalent to the original-no need to retest safety and effectiveness from scratch.

But here’s the key: the law doesn’t force substitution. It gives pharmacists the permission to substitute, as long as the drug has an A code. Each state has its own pharmacy laws, but they all use the FDA’s Orange Book as the official reference. In California, for example, Business and Professions Code Section 4073 says substitution is only allowed for products with an A rating. New York’s Education Department requires pharmacists to consult the most current Orange Book edition before swapping any drug.

This means the FDA doesn’t set state rules-but its TE codes become the state rules. If a drug has a B code, even if it’s FDA-approved, pharmacists in nearly every state can’t legally substitute it without explicit permission from the prescriber.

Why Some Generics Get B Codes

You might wonder: if a drug is approved by the FDA, why wouldn’t it get an A code? The answer lies in complexity.

Simple pills-like metformin or lisinopril-are easy to test. They dissolve the same way, get absorbed the same way, and produce the same blood levels. But what about a topical cream that needs to penetrate skin at a specific rate? Or an inhaler that delivers a precise dose to the lungs? Or a long-acting injection that releases drug slowly over weeks?

For these complex products, proving bioequivalence isn’t straightforward. Traditional blood tests may not capture how the drug behaves in the body. That’s why many of these drugs get B codes-especially those with designations like BT (topical), BN (nebulizers), or BC (extended-release).

A 2022 survey by the National Community Pharmacists Association found that 42% of pharmacists struggled to interpret some B codes, especially for complex delivery systems. Many were unsure whether a BT-rated cream was truly different or just poorly studied. That uncertainty leads to hesitation. Even if the FDA says the drug is safe, pharmacists often won’t substitute it because they fear liability or patient complaints.

And it’s not just pharmacists. Brand-name companies have used the system to delay competition. In 2022, the FDA received 1,247 citizen petitions challenging TE codes-up 17% from the year before. Many of these petitions were filed by brand manufacturers trying to keep complex drugs off the generic market by arguing the data wasn’t strong enough.

The Real Impact: Savings and Access

The system works. And it saves billions.

In 2022 alone, generic drugs with A codes saved the U.S. healthcare system $298 billion, according to IQVIA. That’s 97% of all generic prescriptions. Since 1995, the entire TE code system has contributed to over $1.7 trillion in savings, as noted by former FDA official Dr. Lawrence Yu.

But the savings aren’t just numbers. They’re real people getting life-saving medications they couldn’t afford otherwise. A patient on insulin, asthma inhalers, or blood thinners can switch to a generic with confidence-because the FDA has already verified it works the same way.

Still, there’s a gap. As of October 2023, about 24.3% of FDA-approved multisource drugs had B codes. That’s over 3,400 products where substitution is restricted, even though they’re approved. Many of these are newer complex drugs that haven’t yet been fully evaluated under modern testing standards.

What’s Changing Now

The FDA knows the system needs updating. In 2023, they launched the Complex Generic Drug Initiative to reduce the backlog of B-coded products. They’ve already cut the average review time for complex generics from 34 months in 2018 to 22 months in 2023.

They’ve also released new guidance on how to evaluate therapeutic equivalence for tricky products like topical creams and inhalers. In August 2023, they published a draft document called Complex Products: Considerations for Demonstration of Therapeutic Equivalence. It’s a roadmap to convert more B codes to A codes using advanced testing methods-like in vitro dissolution modeling and real-world pharmacokinetic data.

Plus, the Orange Book itself is going digital. Since January 2023, it’s been available through an API, meaning electronic health records can pull TE code data directly. That means pharmacists won’t have to manually look up codes anymore-they’ll see them right in the prescription screen.

The goal? Reduce the percentage of B-coded drugs from 24.3% to under 15% by 2027. That’s the target set in the FDA’s 2023-2027 Strategic Plan for Generic Drugs.

What This Means for You

If you’re prescribed a generic drug and your pharmacist swaps it for another generic, you can trust the system-unless it’s a B-coded product. In that case, your pharmacist should ask your doctor before switching.

You can check the Orange Book yourself. Go to the FDA’s Drugs@FDA website and search for your drug. Look for the “Therapeutic Equivalence” section. If it says “A,” you’re good. If it says “B,” ask why.

Don’t assume all generics are the same. Two different brands of the same drug can have different TE codes. One might be AA, another AB. That’s because small changes in inactive ingredients, manufacturing process, or release mechanism can affect how the body handles the drug.

And if you’re on a complex medication-like a topical steroid, an inhaler, or a long-acting injection-don’t hesitate to ask your pharmacist if the generic you’re getting has an A code. If it doesn’t, your doctor might need to write “Dispense as Written” on the prescription.

Frequently Asked Questions

What’s Next

If you’re a patient, stay informed. Ask your pharmacist about the TE code of any generic you receive. If it’s a "B," push for clarification. If you’re a prescriber, understand that your "Dispense as Written" instruction overrides substitution rules-but only if you know the difference between an "A" and a "B."

The system isn’t perfect. But it’s the most transparent, science-based framework for generic drug substitution in the world. And it’s getting better-faster, smarter, and more inclusive of complex medicines. The goal isn’t just to cut costs. It’s to make sure everyone gets the same effective treatment, no matter what’s on the label.