iRhythm's $45M settlement over Zio AT marketing to high-risk patients

The FDA had cleared the Zio AT heart monitor for long-term arrhythmia monitoring in non-critical care patients where real-time monitoring is not needed. Per the agency's warning letter, iRhythm instead began marketing the device as mobile cardiac telemetry delivering immediate notifications for 'near real-time monitoring' of 'high-risk patients' — a new patient population whose approval, the FDA said, required a fresh 510(k) filing that never came. Plaintiffs alleged the same pitch ran to investors: a premium-priced, high-growth product story that inflated the stock from January 2022.

FDA inspectors found the change during a summer 2022 inspection of iRhythm's Cypress, California manufacturing facility. The warning letter, dated May 25, 2023 and published in early June, said iRhythm's initial responses were inadequate; the company's shares slid as the letters landed. A securities class action followed in the Northern District of California on February 6, 2024 against the company, CEO Quentin Blackford and former finance chiefs, amended twice to add more officers and the FDA inspection events.

On June 3, 2026, iRhythm entered a binding Stipulation and Agreement of Settlement to resolve the case fully: a $45.0 million payment inclusive of lead plaintiff attorneys' fees, in exchange for dismissal with prejudice and a release of all claims, with no admission of fault. The company booked the $45.0 million liability in Q2 2026, expects roughly $40.0 million back from insurers, and recorded about $14.0 million of net litigation settlement expense.

$45.0M settlement, all-inclusive; ~$40M expected insurance recovery, ~$14M net expense booked in Q2 2026

The high-risk, real-time positioning carried premium pricing and a bigger market, and the company chose to run the new claims without filing the new 510(k) that repositioning required.

The FDA's clearance was narrow — non-critical care patients, no real-time need — so every 'immediate notification for high-risk patients' message sat directly outside it.

Investors were sold the identical story as customers: an innovative product just beginning to penetrate real-time monitoring, which made the stock hostage to the FDA's eventual letter.

Regulatory positioning is investor messaging. Selling a device cleared for low-risk, non-urgent monitoring as real-time cover for high-risk patients invites the FDA and the plaintiffs' bar at once.

The settlement binds as of June 3, 2026, with the claims deadline set for September 18, 2026. Three stockholder derivative suits making the same allegations were stayed pending its resolution. The warning letter itself moved toward resolution through new 510(k) submissions, but iRhythm's legal docket stayed crowded: the 10-Q discloses continuing DOJ grand-jury subpoenas dating to 2021 and an unresolved privilege dispute on appeal at the Ninth Circuit over documents concerning FDA communications.