Therapeutic Equivalence Codes: How FDA Rates Generic Substitutability

When you pick up a prescription at the pharmacy, you might not realize that behind the scenes, a detailed scientific system is deciding whether the pill in your hand can legally replace the brand-name version your doctor wrote. That system is the therapeutic equivalence (TE) code - a simple-looking label, like AB or B, that tells pharmacists whether a generic drug is safe to swap in place of the original. It’s not just paperwork. It’s what keeps millions of Americans from paying hundreds of dollars extra for the same medicine.

The FDA created this system in 1980 through the Orange Book, officially called Approved Drug Products with Therapeutic Equivalence Evaluations. It’s updated every month. Right now, over 14,000 drug products are listed, and 90% of them carry an ‘A’ rating. That means they’re approved for automatic substitution. But what does that actually mean? And why do some generics get a ‘B’ instead?

What Therapeutic Equivalence Really Means

Therapeutic equivalence isn’t about being chemically identical. It’s about being clinically the same. The FDA says a generic must meet three standards:

• Pharmaceutical equivalence: Same active ingredient, strength, dosage form, and route of administration as the brand-name drug.
• Bioequivalence: The body absorbs the drug at the same rate and to the same extent as the original. This is proven through blood tests in healthy volunteers.
• Same clinical effect and safety: No difference in how well it works or how safe it is under the conditions listed on the label.

It’s not enough for a generic to have the same pills. If your body doesn’t absorb it the same way, it could underdose or overdose you. That’s why the FDA doesn’t just rely on chemical formulas - they test how the drug behaves in real people.

The Code System: A, B, and What Comes After

The TE code is a one- or two-letter label you’ll find next to every generic in the Orange Book. The first letter tells you the big picture.

A-rated means the product is considered therapeutically equivalent to the brand-name drug. These are the ones pharmacists can swap without asking your doctor. But even within ‘A’, there are subcategories:

• AB: The most common. The generic has been tested and proven bioequivalent to the brand. It’s a direct substitute.
• AB1, AB2, AB3, AB4: These appear when multiple brand-name drugs (called Reference Listed Drugs or RLDs) exist for the same active ingredient. For example, if Drug X has two different brands on the market, the generics will be labeled AB1 (matches Brand A) and AB2 (matches Brand B). You can’t swap between AB1 and AB2 unless they’re both approved for the same RLD.

B-rated means the FDA hasn’t confirmed therapeutic equivalence. This doesn’t mean the drug is unsafe. It means there’s not enough data - or the data is complicated. Common B-codes include:

• BC: Extended-release tablets or capsules where bioequivalence is hard to prove.
• BD: Active ingredients with known bioequivalence issues.
• BT: Topical creams or ointments where absorption varies too much between products.
• BX: Not enough data to make a call. These are often new generics still under review.

Some B-rated products are still used - and even preferred - by doctors. But pharmacists can’t substitute them without a specific order from the prescriber. In 49 states, laws require that substitution only happens for A-rated drugs unless the doctor says otherwise.

Why Some Generics Get a B - Even When They Should Work

You might wonder: if the generic has the same active ingredient, why wouldn’t it work? The answer lies in complexity.

Take a simple tablet: aspirin 325mg. The ingredients dissolve the same way. Bioequivalence is easy to prove. But what about an inhaler? Or a cream that needs to penetrate skin? Or a long-acting injection that releases medicine over weeks? These aren’t just about the chemical. They’re about how the drug is packaged, how it’s released, how it interacts with your body over time.

That’s where the system breaks down. The FDA’s current tests - mostly based on blood levels - don’t always capture what happens in the body. A 2022 study in the Journal of Generic Medicines found that some topical creams with identical ingredients showed different healing rates in patients. But because they passed the standard blood test, they still got an ‘A’ rating. Meanwhile, other creams with better clinical results got a ‘B’ because their absorption curves didn’t match the brand perfectly.

Dr. Duxin Sun from the University of Michigan says this is a real problem. “We’re using 1980s tools to judge 2020s drugs,” he told researchers. “For complex products, we need better tests.” The FDA agrees. Their 2022 draft guidance proposes using real-world data - like patient outcomes and pharmacy records - to supplement traditional bioequivalence studies.

How Pharmacists Use TE Codes Every Day

Every time a patient walks in with a prescription, the pharmacist checks three things:

1. Is the drug listed in the Orange Book?
2. What’s its TE code?
3. Does state law allow substitution?

According to a 2022 survey of 1,200 independent pharmacists, 87% said TE codes make their job easier. They check the Orange Book website at least once a week - sometimes multiple times a day. The site had 1.7 million visitors in just three months in 2023.

But confusion still happens. A 2022 American Medical Association survey found that 42% of physicians didn’t understand what a ‘B’ code meant. Some thought it meant the drug was inferior. Others didn’t know they could override the substitution block by writing “Dispense as Written” on the prescription.

And pharmacists? They’re caught in the middle. One pharmacist in Ohio told a reporter: “I had a patient come back angry because I didn’t switch their inhaler. They thought I was trying to save money. But the code was BT. I couldn’t risk it.”

The Big Picture: Savings, Substitution, and Safety

Without TE codes, generic drugs wouldn’t be interchangeable. That’s the whole point. In 2023, generics made up 90% of all prescriptions filled in the U.S. - but only 23% of total drug spending. That’s $370 billion saved in one year.

Each time a pharmacist swaps a brand-name drug for an A-rated generic, the system saves money - and it’s safe. Dr. Steven Kessler, a former FDA official, says there’s never been a documented case of a patient harmed because an FDA-approved generic was substituted. That’s because the system works.

But the future is tricky. As more complex drugs enter the market - think biologics, injectables, and smart delivery systems - the current code system struggles. The FDA reports a 22% increase in B-rated applications for complex generics between 2018 and 2022. That’s not a failure. It’s a sign the system is being pushed to its limits.

The FDA’s 2023-2027 plan aims to reduce B-rated products for complex generics by 30%. That means better testing, more data, and smarter rules. The goal isn’t to make everything A-rated. It’s to make sure every A-rated product truly works the same - and every B-rated product gets the scrutiny it deserves.

What You Should Know as a Patient

You don’t need to memorize AB1 or BX. But here’s what matters:

• If your doctor writes a brand-name drug, the pharmacist can swap it for a generic - if it has an ‘A’ code.
• If you’re switched to a generic and you feel different - worse side effects, less relief - tell your doctor. It’s rare, but it can happen.
• If your prescription says “Do Not Substitute,” that’s your right. The pharmacist must follow it.
• Don’t assume a ‘B’ code means the drug is bad. It just means the FDA needs more proof. Ask your pharmacist if it’s safe for you.

The system isn’t perfect. But it’s the best we have. And it’s saving billions while keeping people healthy.