FDA Therapeutic Equivalency Codes: How Laws Determine Which Generic Drugs Can Be Substituted

When your pharmacist hands you a generic pill instead of the brand-name drug your doctor prescribed, you might not think twice. But behind that simple swap is a complex legal and scientific system designed to ensure safety, consistency, and cost savings. At the heart of it all are the FDA therapeutic equivalency codes-a set of letters and numbers that tell pharmacists, doctors, and state regulators whether a generic drug can legally replace the brand-name version without risking your health.

What Are FDA Therapeutic Equivalency Codes?

These codes, known as TE codes, are assigned by the FDA to every multisource prescription drug listed in the Approved Drug Products with Therapeutic Equivalence Evaluations, commonly called the Orange Book. First published in 1980 and expanded after the 1984 Hatch-Waxman Act, the Orange Book is the official federal guide for determining if a generic drug is interchangeable with its brand-name counterpart.

The TE code is a two-character alphanumeric label. The first letter tells you the big picture: A means the FDA says the generic is therapeutically equivalent to the brand-name drug. B means it’s not. The second character gives more detail about the drug’s form or any lingering scientific questions.

For example:

• AA = Immediate-release oral drug with no bioequivalence issues. This is the gold standard.
• AB = Originally had questions, but later proven equivalent after more testing.
• BT = Topical product (like a cream or ointment) with unresolved bioequivalence concerns.
• BN = Nebulized aerosol product-hard to test for equivalence because delivery matters.
• BX = Not enough data to judge. Not approved for substitution.

These aren’t just labels. They’re legal gatekeepers. In every state, pharmacists are required by law to check the Orange Book before substituting a generic. If the code isn’t an ‘A’, they can’t switch it out-no matter how much money it saves.

How the FDA Decides Who Gets an ‘A’ Code

Getting an ‘A’ rating isn’t about matching the pill’s color or shape. It’s about proving the generic drug does the same thing in your body as the brand-name version.

The FDA requires three things:

1. Pharmaceutical equivalence - The generic must contain the same active ingredient, strength, dosage form (pill, injection, etc.), and route of administration (oral, topical, etc.) as the brand-name drug.
2. Bioequivalence - The generic must deliver the same amount of active ingredient into your bloodstream at the same rate as the brand. This is tested in clinical studies with healthy volunteers.
3. Identical safety and efficacy - The FDA reviews all available data to confirm the generic produces the same clinical results and side effect profile.

Even small changes can knock a product out of ‘A’ status. For example, if a generic uses a different inactive ingredient that affects how quickly the drug dissolves, the FDA might assign a ‘B’ code-even if the active ingredient is identical.

This is why two generics of the same drug can have different codes. One might be ‘AA’, another ‘AB’, and a third ‘BX’. It all depends on the formulation, the manufacturer’s data, and how well they proved bioequivalence.

Why ‘B’ Codes Exist-and Why They’re a Problem

Not every generic gets an ‘A’ code. About 24% of FDA-approved multisource drugs still carry a ‘B’ rating as of October 2023. These are mostly complex products: extended-release pills, inhalers, topical creams, injectables, and nasal sprays.

Why? Because testing bioequivalence for these drugs is hard. A cream might look the same, but if the active ingredient doesn’t penetrate the skin the same way, it won’t work the same. An extended-release pill might release the drug over 12 hours, but if the release pattern is slightly off, it could cause side effects or reduced effectiveness.

The FDA admits this is a challenge. In 2023, they launched the Complex Generic Drug Initiative to reduce the number of ‘B’ codes. Since 2018, the average review time for these complex generics has dropped from 34 months to 22 months. Still, only about 1 in 20 complex generics currently gets an ‘A’ code.

Pharmacists are cautious. A 2023 survey found that 68% of pharmacists hesitate to substitute topical products with ‘BT’ codes-even when the FDA says they’re approved. Why? Because real-world outcomes don’t always match lab results. Patients report different skin reactions, inconsistent pain relief, or unexpected side effects.

And brand-name companies aren’t helping. In 2022, the FDA received over 1,200 citizen petitions challenging TE codes-up 17% from the year before. Most come from manufacturers trying to block generic competition for profitable, complex drugs.

State Laws Turn FDA Codes Into Legal Rules

The FDA assigns the codes. But state pharmacy boards decide if substitution is allowed.

All 50 states and D.C. base their substitution laws on the Orange Book. If a drug has an ‘A’ code, substitution is permitted. If it has a ‘B’ code, substitution is prohibited.

For example:

• California - Business and Professions Code §4073 explicitly says pharmacists can only substitute drugs with ‘A’ ratings.
• New York - The Office of the Professions requires pharmacists to consult the current Orange Book edition before any substitution.
• Texas - Allows substitution only if the generic is listed as ‘A’ and the prescriber hasn’t written “dispense as written.”

Even if a doctor prescribes a brand-name drug, the pharmacist can still switch it to a generic-with an ‘A’ code-unless the doctor specifically blocks it. That’s called “prescriber opt-out.” But if the code is ‘B’, the pharmacist has no legal authority to substitute, no matter what the doctor says.

This system keeps patients safe. It also keeps costs down. In 2022, drugs with ‘A’ codes saved the U.S. healthcare system $298 billion. That’s 97% of all generic prescriptions.

What Happens When a Code Changes?

TE codes aren’t permanent. The FDA updates the Orange Book every month. If a manufacturer submits new data proving a previously ‘B’-rated drug is actually equivalent, the FDA can upgrade it to ‘A’.

One famous example: Zydus Pharmaceuticals’ generic version of the asthma inhaler Albuterol. Originally rated ‘BX’ due to delivery concerns, after years of testing and FDA review, it was upgraded to ‘AB’ in 2021. That single change opened the door for widespread substitution and saved patients millions.

But changes take time. The average time from ANDA approval to TE code assignment is 10.3 months. For complex drugs, it can stretch to 18.7 months.

Pharmacists must stay updated. Out-of-date Orange Book printouts or unlinked digital systems can lead to illegal substitutions-or missed opportunities to save money.

What You Should Know as a Patient

You don’t need to memorize TE codes. But you should understand this:

• If you’re prescribed a generic and it looks different from your last refill, that’s normal. Different manufacturers make different versions.
• If you notice a change in how the drug works-side effects, effectiveness, or how it feels-you should tell your doctor or pharmacist. It could be a formulation issue.
• Ask your pharmacist: “Is this generic approved for substitution?” They can check the Orange Book in seconds.
• Don’t assume all generics are equal. Only those with ‘A’ codes have been proven interchangeable.

The system works because it’s grounded in science and law. It’s not perfect, but it’s the best tool we have to ensure that generics are safe, effective, and affordable.

What’s Next for Therapeutic Equivalency?

The FDA’s 2023-2027 Strategic Plan aims to cut the number of ‘B’ codes from 24.3% to under 15% by 2027. To get there, they’re investing $28.7 million through GDUFA III to develop better testing methods for complex drugs.

New draft guidance released in August 2023 makes it clearer that minor differences in inactive ingredients won’t automatically disqualify a drug from an ‘A’ rating-as long as performance is the same.

The Orange Book is also going digital. Since January 2023, it’s been available via API, meaning electronic health records can pull real-time TE code data. Soon, pharmacists won’t need to open a separate website-they’ll see the code right in their dispensing software.

This isn’t just about money. It’s about access. More ‘A’ codes mean more patients can get affordable meds without risking their health.