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

When you pick up a prescription, you might get a pill that looks completely different from the one your doctor prescribed. That’s not a mistake. It’s likely a generic version-and it’s legally allowed to replace the brand-name drug because of something called a Therapeutic Equivalence Code, or TE Code. These codes are the reason millions of Americans save hundreds of dollars every year on prescriptions without risking their health. But how do they actually work? And why do some people still feel like the generic doesn’t work the same?

What TE Codes Really Mean

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, commonly known as the Orange Book. These codes tell pharmacists whether a generic drug can be swapped for the brand-name version without changing how well it works or how safe it is.

The system isn’t just a suggestion-it’s the law. All 50 states use TE Codes to determine when pharmacists can automatically substitute a generic drug unless the doctor says no. That’s why you’ll often see a generic on your receipt even if you didn’t ask for it.

TE Codes are made up of two or three letters. The first letter is the most important: A means the drug is therapeutically equivalent to the brand. B means it’s not. So if you see an “AA” or “AP” code, you’re looking at a generic that’s been tested and approved as a direct substitute.

How the FDA Decides If a Generic Is Equivalent

Getting an “A” rating isn’t easy. The FDA doesn’t just check the active ingredient. They require proof that the generic meets three strict criteria:

• Pharmaceutical equivalence: Same active ingredient, strength, dosage form, and route of administration.
• Bioequivalence: The body absorbs the generic drug at the same rate and to the same extent as the brand. This is proven through clinical studies measuring blood levels of the drug over time.
• Clinical equivalence: The drug works the same way in real patients-same benefits, same side effects, same safety profile.

For example, generic atorvastatin (the active ingredient in Lipitor) must show that its absorption levels fall within 80-125% of the brand’s. That’s a tight window. The FDA requires 90% confidence that the generic stays within that range. If it doesn’t, it doesn’t get an “A” rating.

The FDA only evaluates drugs that have multiple versions on the market. Single-source generics-where only one company makes that version-don’t get TE codes because there’s nothing to compare them to.

What the Letters After “A” Actually Mean

You might see codes like AA, AN, AP, or AT. These aren’t random. They tell you the exact formulation type:

• AA: Oral solid dosage (like tablets or capsules) with no bioequivalence concerns.
• AN: Injectable solution.
• AP: Powder for injection.
• AT: Topical cream or ointment.

These codes help pharmacists and doctors know if two drugs are truly interchangeable. For example, two “AA”-rated levothyroxine tablets can be swapped freely. But a tablet and a capsule-even if they have the same active ingredient-might have different “A” codes because their absorption rates can vary.

Where TE Codes Fall Short

TE Codes are powerful, but they’re not perfect. The system works great for simple pills-like blood pressure or cholesterol meds. But it struggles with complex drugs.

Take inhalers. Two generic asthma inhalers might have the same active ingredient and meet bioequivalence standards. But if the propellant or spray mechanism is slightly different, the drug might not reach the lungs the same way. In 2019, the FDA pulled TE ratings for several generic budesonide inhalers after reports of inconsistent dosing.

Narrow therapeutic index (NTI) drugs are another problem. These are medications where even tiny differences in blood levels can cause serious side effects or make the drug useless. Warfarin (a blood thinner) and levothyroxine (a thyroid hormone) fall into this category. While the FDA gives many of these drugs “A” ratings, some patients report feeling worse after switching-even when the TE code says they’re identical. A 2022 study found 12.7% of patients noticed changes after switching between TE-rated generics. Clinical tests showed no difference, but the perception matters. For some, it’s enough to ask their doctor to block substitution.

Why TE Codes Save Billions

The real power of TE Codes isn’t just science-it’s economics. Generic drugs with TE ratings cost 80-85% less than their brand-name counterparts. Since 1995, this system has saved the U.S. healthcare system over $2.2 trillion, according to former FDA Director Dr. Janet Woodcock.

In 2022, over 90% of all prescriptions filled in the U.S. were for generics. That’s 6 billion prescriptions a year. Without TE Codes, pharmacists wouldn’t have the legal or scientific backing to make those swaps. Insurance companies and pharmacies rely on them to keep costs down.

Pharmacy benefit managers (PBMs), hospitals, and even Medicaid programs use TE Codes to design formularies. If a generic doesn’t have an “A” rating, it’s often excluded from coverage. That pushes manufacturers to meet the FDA’s standards-or stay off the market.

What Pharmacists See Every Day

For pharmacists, TE Codes are part of the daily routine. They check the Orange Book-either online or through their pharmacy software like Epic or Cerner-before dispensing a generic. Most systems flag non-equivalent drugs automatically.

A 2022 survey by the National Community Pharmacists Association found 91% of pharmacists have high confidence in TE-rated substitutions. Pharmacy technicians say verifying a TE code adds less than 30 seconds to each prescription.

But it’s not always smooth. Sometimes, state formularies lag behind the latest Orange Book updates. In 2022, about 3.2% of substitutions were affected by these delays. The FDA’s help desk gets around 1,200 TE-related questions each month, and most are resolved within two business days.

What Patients Should Know

If you’ve ever switched from a brand to a generic and felt “off,” you’re not alone. But here’s the catch: studies show most of those feelings aren’t due to the drug not working-they’re due to expectation. People expect generics to be weaker. That mindset can create real symptoms, even if the drug is identical.

Still, if you’re on a drug like warfarin, levothyroxine, or seizure medication, talk to your doctor before switching. Even if the TE code says it’s safe, your body might respond differently. Ask for a consistent brand or generic. Many doctors will write “Dispense as Written” or “Do Not Substitute” on the prescription if you’re concerned.

For most people-those taking statins, antidepressants, or diabetes meds-switching to a TE-rated generic is safe, effective, and smart. The FDA’s data shows no difference in hospitalizations or adverse events between brand and TE-rated generics.

The Future of TE Codes

The FDA is working to improve the system. In 2022, they released updated guidance on how to evaluate therapeutic equivalence, especially for complex drugs. A pilot program is now testing whether real-world patient data can help refine TE ratings.

By 2024, TE Codes will start being applied to biosimilars-biologic drugs that mimic complex treatments like those for cancer or autoimmune diseases. These are harder to copy than pills, so the new codes will need to be more detailed.

By 2027, experts predict over 93% of all prescriptions will be for TE-rated generics. That’s not just a number-it’s a sign that the system works. It’s not perfect, but for the vast majority of patients, it’s the best tool we have to make quality medicine affordable.