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

When you pick up a prescription for a generic drug, you might assume it’s just a cheaper version of the brand-name pill. But here’s the truth: not all generics are created equal. That’s where Therapeutic Equivalence Codes come in. These simple two- or three-letter codes-like AA, AP, or AT-are the FDA’s official stamp of approval that a generic drug can be safely swapped for its brand-name counterpart without any loss in effectiveness or safety. If you’ve ever wondered why your pharmacist hands you a different-looking pill with the same name, or why your insurance pushes for generics, this is the system behind it.

What Are Therapeutic Equivalence Codes (TE Codes)?

Therapeutic Equivalence Codes are part of the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. First introduced in 1984 after the Hatch-Waxman Act, these codes were created to bring clarity to a messy system. Before TE Codes, pharmacists had no consistent way to know if a generic drug would work just as well as the brand. Some states allowed substitution, others didn’t. Patients got mixed results. The FDA stepped in to create a science-based standard.

Every multi-source drug-meaning any medicine with more than one manufacturer-gets a TE Code if it’s been reviewed and approved by the FDA. The code tells you two things: whether the drug is equivalent (A or B), and how it was evaluated (the second or third letter). An 'A' means it’s therapeutically equivalent. A 'B' means it’s not. That’s it. Simple. But the details behind it? That’s where the science gets deep.

How the FDA Decides If a Generic Is Equivalent

The FDA doesn’t just look at the active ingredient. They check three things: pharmaceutical equivalence, bioequivalence, and clinical equivalence.

First, pharmaceutical equivalence. That means the generic has the same active ingredient, strength, dosage form, and route of administration as the brand. If your brand is a 20mg tablet taken by mouth, the generic must match that exactly.

Then comes bioequivalence. This is the real test. The generic must deliver the same amount of drug into your bloodstream at the same rate as the brand. The FDA requires bioequivalence studies showing that the 90% confidence interval for the peak concentration (Cmax) and total exposure (AUC) of the generic falls between 80% and 125% of the brand. That’s not a guess-it’s a strict statistical standard backed by real patient data.

Finally, clinical equivalence. Even if the numbers look good, the FDA checks if the drug works the same way in real life. For most common drugs-like blood pressure pills, cholesterol meds, or diabetes treatments-the data shows no difference in outcomes. But for drugs with a narrow therapeutic index (like warfarin or levothyroxine), the margin for error is tiny. That’s why some of these drugs still get special attention.

What Do the Letters Mean? A, B, AA, AP, AT

The first letter is always A or B. A = equivalent. B = not equivalent. The second letter tells you the basis of the evaluation. Here are the most common ones:

• AA: Oral solution or powder for oral solution. Used for drugs like levothyroxine.
• AN: Injectable solution. Common for antibiotics or IV meds.
• AO: Oral solution. Often used for pediatric or liquid formulations.
• AP: Powder for injection. Think of drugs reconstituted before use.
• AT: Topical cream or ointment. Important for skin conditions.

These codes aren’t random. They reflect how the drug is absorbed, how it’s made, and how it’s meant to be used. For example, a generic with an AA code for levothyroxine has passed strict tests for consistent absorption in the gut. That’s critical because even small changes in thyroid hormone levels can affect your heart rate, weight, and energy.

Why TE Codes Matter for Patients and Pharmacists

Every year, over 6 billion prescriptions in the U.S. are filled with generic drugs. About 90% of those are TE-rated. That’s not an accident. It’s because pharmacists trust these codes.

When you walk into a pharmacy, the system automatically checks the TE Code before swapping your brand for a generic. If it’s an 'A' code, the pharmacist can substitute it without asking you or your doctor-unless your doctor specifically wrote “Dispense as Written” or “Do Not Substitute.” That’s the law in all 50 states. It’s why your $150 brand-name statin suddenly costs $12.

According to the National Community Pharmacists Association, 91% of pharmacists report high confidence in substituting TE-rated generics. Pharmacy technicians say verifying the code adds less than 30 seconds to each prescription. That efficiency saves time, money, and reduces errors.

Patients, too, mostly notice the savings. GoodRx data shows a 4.7 out of 5 rating for TE-rated generics used for chronic conditions like hypertension and diabetes. But here’s the catch: 12.7% of patients report feeling different after switching-even when clinical tests show no difference. That’s not always about the drug. It’s about packaging, size, color, or even the placebo effect. But for drugs like atorvastatin or metformin, studies like the 2021 JAMA Internal Medicine analysis confirm: no difference in LDL levels or blood sugar control.

Where TE Codes Fall Short

TE Codes are powerful-but they’re not perfect.

First, they don’t cover single-source generics. If only one company makes a drug, the FDA doesn’t assign a TE Code. That’s why some older or niche drugs still carry high prices.

Second, complex products like inhalers, topical steroids, and injectables are harder to evaluate. In 2019, the FDA withdrew TE ratings for several generic budesonide inhalers because they didn’t deliver the same amount of medicine to the lungs-even though they met the bioequivalence numbers. That’s because delivery devices matter. A pill’s absorption is predictable. An inhaler’s isn’t.

Third, TE Codes don’t account for individual differences. Someone with a sensitive metabolism, liver disease, or multiple medications might react differently to a generic-even if it’s rated 'A.' That’s why doctors sometimes avoid substitution for drugs like warfarin, despite identical TE ratings. Patient reports on Drugs.com show 87 complaints about switching warfarin generics, even though studies don’t show a clear pattern of harm.

Dr. Jerry Avorn from Harvard puts it bluntly: TE Codes oversimplify equivalence for certain drugs. He’s right. But the FDA agrees. In their 2022 guidance, they acknowledged that TE evaluations are product-specific and don’t guarantee equivalence in every clinical scenario.

How TE Codes Compare to Other Countries

The U.S. system is unique in its precision and legal integration. In Europe, the EMA doesn’t use a coding system. Each country decides on substitution independently. In Canada, there’s a similar concept, but no standardized code. In Germany, doctors-not pharmacists-control substitution.

The U.S. model works because it’s tied to state laws. Every pharmacy system, insurance formulary, and hospital protocol uses the Orange Book as the final authority. That’s why you can get the same generic in New York, Texas, or Oregon without confusion.

What’s Next for TE Codes?

The FDA is expanding the system. By 2024, they plan to introduce TE Codes for biosimilars-complex biologic drugs like insulin or Humira generics. They’re also testing real-world data from electronic health records to supplement lab studies. That could help catch subtle differences in how generics perform outside the lab.

Right now, TE-rated generics make up 90.1% of all prescriptions. By 2027, that number is expected to hit 93.4%. The Congressional Budget Office estimates TE Codes will save $1.2 trillion between 2023 and 2032. That’s not just a number. It’s more people getting their meds, fewer people skipping doses because of cost, and less strain on the healthcare system.

How to Check a TE Code Yourself

You don’t need a pharmacy degree to look up a TE Code. The FDA’s Orange Book is free and online. Just search the drug name or active ingredient. If it’s listed with an 'A' code, you can safely substitute. If it’s 'B,' ask your pharmacist why.

Most pharmacy software-like Epic or Cerner-shows the TE Code right on the screen when a prescription is filled. But if you’re curious, you can check before you pick up your prescription. The American Pharmacists Association even has a free TE Code app with over 50,000 downloads.

And if you’re switching generics and feel off? Tell your pharmacist. It’s not always the drug. But it’s worth checking.

Frequently Asked Questions

Final Thoughts

Therapeutic Equivalence Codes are one of the quietest, most effective tools in modern medicine. They’re not flashy. They don’t make headlines. But they’re why millions of Americans can afford their heart meds, their insulin, their antidepressants. The system isn’t flawless. It struggles with complex drugs and patient perceptions. But when it works-as it does for most common prescriptions-it saves lives and money without sacrificing safety.

Next time you get a generic, check the TE Code. If it’s an 'A,' you’re getting the same medicine, just at a fraction of the cost. And that’s not just smart pharmacy-it’s smart healthcare.