FDA Custom Device Exemption: Five-Unit Cap and Annual Report

The FDA custom device exemption, set out in Section 520(b) of the Federal Food, Drug, and Cosmetic Act, lets a manufacturer build a device for a single patient or a specific physician’s professional need without going through 510(k) clearance or premarket approval.¹ It is narrow on purpose. You get the exemption only if the device meets every statutory condition, you cap production at five units per device type per year, you file an annual report, and you continue to meet quality, labeling, registration, and adverse-event obligations. Miss any single piece and the device loses exempt status entirely, which turns a lawful custom build into an unapproved device distributed in violation of federal law.

Which Devices Qualify

The statute lists seven design-level conditions that must all be true at once. The device is built or modified to fill the order of a specific physician or dentist. It deviates from a standard that would otherwise apply. It is not offered for general commercial distribution. It addresses a unique pathology or physiological condition that no domestically available device can treat. It either serves a physician’s special professional need or is intended for a named individual patient. It is produced on a case-by-case basis. And it may share design features or materials with commercially distributed devices without that overlap alone disqualifying it.¹

Three further limitations sit on top of those. The condition being treated must be rare enough that running clinical investigations would be impractical. Production of any one device type is capped at five units per year. And the manufacturer must file an annual custom device report.¹ Ten requirements in total, and every one has to be met.

FDA guidance sharpens what the “unique” language actually means. A unique physiological condition is one that no domestically available device can treat. A unique pathology refers to anatomical abnormalities that similarly lack a domestic treatment option. A sufficiently rare condition is one where the patient population is too small to make clinical trials practical.² The working test: if a legally marketed device already exists in the United States that could treat the patient, the exemption does not apply.

Only a physician or dentist can order a custom device. The statute also allows any other specially qualified person designated by the Secretary through rulemaking, though that category is rarely invoked. The ordering practitioner has to provide clinical justification explaining why the patient’s condition demands a device built to unique specifications.²

The Five-Unit Annual Cap

No more than five units per year of any particular device type may be produced under the exemption. The cap was added by the FDA Safety and Innovation Act.¹ FDA reads five units as five new cases per year: five new patients for a patient-focused device, or five new ordering physicians for a physician-focused device. The count captures every unit of that type the manufacturer provides that remains in the recipient’s possession.²

Sizing is where manufacturers get caught. If you ship several sizes so the physician can choose the best fit, the unused units still count against the cap unless the physician either destroys them and gives you a written statement of destruction, or returns them to you. No documentation, and every unit shipped counts.² Exceed five in a year and every device of that type loses its exempt status, retroactively pulling all of them into full premarket requirements.

No Commercial Marketing

A custom device cannot be marketed, advertised, or made generally available in finished form through any commercial channel. FDA reads that broadly. The prohibition covers electronic and print literature, promotional material, and testimonials. You cannot run ads, list the device in a product catalog, or hold finished inventory waiting for future orders.² Every unit has to be built in response to a specific physician order for a specific patient or professional need. This is what keeps the exemption from becoming a back door around premarket review.

Records You Must Keep for Each Device

Every custom device needs its own file, and FDA inspectors can ask to see it. The record has to substantiate that the device genuinely meets the statutory criteria, not just recite them. At a minimum, expect to keep:

The written physician or dentist order, with clinical justification for why a custom device is necessary.
Patient identification for patient-focused devices, or identification of the physician’s special need for physician-focused devices.
Clinical data such as anatomical or pathological information showing why no commercially available device would work.
Manufacturing specifications detailing how the device was built to the ordered specifications.
Records of the evaluation you performed to confirm no domestically available device could treat the patient’s condition.

Vague entries such as “patient has unusual anatomy” will not hold up. The file needs objective measurements, imaging, or diagnostic detail behind the claim.²

Labeling

Skipping premarket review does not mean skipping labeling. FDA guidance requires the label to include a clear statement that the product is a custom device, the ordering physician’s name, patient information where applicable, indications for use, sterilization status, composition, and storage conditions. The label has to stay on the device from the manufacturing facility to the clinical site.³ Removing or obscuring the custom device statement anywhere in the distribution chain is a labeling violation on its own.

Quality System, Registration, and Fees

Custom device manufacturers have to comply with the Quality Management System Regulation at 21 CFR Part 820, which took full effect on February 2, 2026. The QMSR governs design, manufacturing methods, packaging, labeling, storage, and servicing of all finished devices intended for human use, and a device that fails to comply is considered adulterated under federal law.⁴ Even when every device is one of a kind, you need documented design controls, production controls, and sterilization procedures, stored alongside the individual device files so everything is accessible during an audit.

Registration is separate. Custom device manufacturers generally must register their establishment and list their devices under 21 CFR Part 807, the same as any other device manufacturer. There is no blanket exemption for custom devices. A narrow exception covers licensed practitioners who manufacture or modify devices solely for use in their own practice, and persons who manufacture devices only for personal research or teaching, but a dedicated shop producing custom devices for outside physicians does not qualify.⁵

The annual establishment registration fee for fiscal year 2026 is $11,423 per facility. FDA may waive the fee for small businesses with $1,000,000 or less in gross receipts if paying it would create a financial hardship, but the waiver is discretionary.⁶ An establishment that has not paid the fee is not legally registered even if the other registration steps are complete. Many states require a separate manufacturer license as well, with fees that vary.

The Annual Report

If you distributed even one custom device during a calendar year, you owe FDA an annual report. The requirement is codified at Section 520(b)(2)(C) of the FD&C Act.¹ Skip it and the devices you distributed as custom devices lose their exempt status entirely, retroactively becoming subject to premarket approval or clearance.²

Each report covers one full calendar year, January 1 through December 31, and must be submitted no later than March 31 of the following year. It goes to the Center for Devices and Radiological Health. Contents include:

A cover letter with contact information and a clear statement identifying the submission as a Custom Device Annual Report.
A signed truthful and accurate statement certifying the report’s contents.
A summary of the number of custom devices manufactured and distributed during the reporting period.
Device-specific detail: for patient-focused devices, a justification for how each device meets the statutory criteria plus a summary of units shipped, used, returned, or destroyed; for physician-focused devices, the same information organized around the ordering physician.

Contact FDA’s Custom Device program at CustomDevices@fda.hhs.gov for the current submission address and format. FDA guidance calls for at least one hard copy.³ Keep a copy of the report you submitted and any delivery confirmation.

Adverse Event Reporting

Custom devices are fully subject to Medical Device Reporting under 21 CFR Part 803. The premarket exemption does not touch post-market safety obligations. If you become aware that one of your custom devices may have caused or contributed to a death or serious injury, or malfunctioned in a way likely to cause death or serious injury if it happened again, you have to file with FDA within 30 calendar days. Events that require urgent remedial action to prevent substantial harm to public health have a five-working-day deadline.⁷

Licensed practitioners who manufacture or import devices solely for use in treating their own patients are exempt from MDR, but a standalone manufacturer producing custom devices for other physicians is not. Corrections and removals reporting under 21 CFR Part 806 also applies if a distributed device has to be recalled or corrected.

Penalties for Getting It Wrong

The exemption is all-or-nothing. Missing documentation, exceeding the five-unit cap, failing to file the annual report, advertising the device commercially: any one of these can strip exempt status from every device of that type. Once that happens, you have distributed an unapproved medical device, which is a prohibited act under the FD&C Act.²

Federal law provides for civil penalties of up to $15,000 per violation and up to $1,000,000 for all violations in a single proceeding. Criminal penalties for a first offense reach one year of imprisonment and a $1,000 fine. Repeat violations or those committed with intent to defraud reach three years and a $10,000 fine.⁸ Beyond formal penalties, FDA can issue warning letters, seize devices, or seek injunctions that halt manufacturing. For a small custom shop, even the cost of responding to an FDA inquiry can be enough to close the operation, which is why the per-device file, the label statement, the annual report, and the five-unit count all deserve attention from the first order forward.

1
Office of the Law Revision Counsel. 21 USC 360j – General Provisions Respecting Control of Devices
2
U.S. Food and Drug Administration. Custom Device Exemption – Guidance for Industry and Food and Drug Administration Staff
3
U.S. Food and Drug Administration. Custom Device Exemption – Guidance for Industry and Food and Drug Administration Staff
4
eCFR. 21 CFR Part 820 – Quality Management System Regulation
5
eCFR. 21 CFR Part 807 – Establishment Registration and Device Listing for Manufacturers and Initial Importers of Devices
6
Federal Register. Medical Device User Fee Rates for Fiscal Year 2026
7
eCFR. 21 CFR Part 803 – Medical Device Reporting
8
Office of the Law Revision Counsel. 21 USC 333 – Penalties