Inspire Lawsuit Alleges Sleep Apnea Implant Problems Concealed

Board of directors is accused of misleading shareholders about their preparation to roll out the Inspire V sleep apnea implant, despite knowing about several problems that could be encountered.

An Inspire sleep apnea device recall has led to a shareholder lawsuit against the manufacturers’ board of directors, who are accused of mismanaging the rollout of its next-generation device, triggering a sharp drop in stock value.

The complaint (PDF) was filed by Mary Korte in the U.S. District Court for the Southern District of New York on January 27, against Inspire Medical Systems Inc. and its board of directors and officers. The lawsuit claims the officers breached their fiduciary duties and violated federal security laws by misleading shareholders during the rollout of the Inspire V Implantable Pulse Generator (IPG), which is part of an implantable neurostimulation system designed to treat obstructive sleep apnea (OSA).

The Inspire Upper Airway System (UAS) was first approved by the U.S. Food and Drug Administration in 2014. It consists of a small implantable pulse generator in the chest, a stimulation lead that activates the hypoglossal nerve to move the tongue forward, and a sensing lead that tracks breathing patterns. Patients turn therapy on before bed using a remote control or smartphone app, eliminating the need for CPAP masks or hoses. This “mask-free” design made Inspire a popular alternative for patients unable to adjust to traditional sleep-apnea machines.

The Inspire V Implantable Pulse Generator is a key component of the UAS and contains the programmed settings prescribed by a physician, controlling the timing and intensity of each stimulation cycle.

However, the company announced an Inspire IV IPG recall in the summer of 2024, due to a manufacturing defect that could result in electricity leaking into patients’ bodies. Shortly thereafter, they rolled out the Inspire V, which Korte’s lawsuit claims fared poorly due to problems the board knew about but refused to communicate with shareholders, leading them to believe the company was in better condition than it was.

Originally, the Inspire V IPG was supposed to be “soft launched” in late 2024, and then fully launched in the U.S. by February 2025. However, in an earnings call that August, Inspire officials told investors the device, its flagship product, was facing several problems with its introduction.

“The truth was fully revealed on August 4, 2025, when the Company issued a press release to discuss its financial earnings for the second quarter of fiscal year 2025.”

— Mary Korte v. Inspire Medical Systems Inc. et al

The Inspire lawsuit indicates that the company told shareholders it was lowering its full year earnings by 80%, claiming that the Inspire V’s launch had encountered difficulties that would slow their efforts to transition customers from the Inspire IV to the new device.

Shareholders were told the Inspire sleep apnea implant problems were driven by weak demand, excess inventory, and the company’s failure to complete surgeon training at key medical centers where the Inspire V was expected to be most widely used. Even trained surgeons, the company said, would have been unable to seek Medicare reimbursement for the implant until July 2025.

Korte’s complaint indicates these are all things that the board knew or should have known long before shareholders were informed.

Between the 2024 Inspire IV recall and the 2025 rollout of the Inspire V, the lawsuit indicates Inspire board members made misleading statements about the company’s financial position and the upcoming rollout by reassuring stockholders that the training was proceeding as planned.

This led to artificially inflated stock prices and shareholders convinced that the company was more valuable than it was until the August 2025 earnings report. The company’s stock price dropped by about a third, declining $42.04 per share on August 4, 2025.

Korte presents claims alleging Inspire’s board violated the Exchange Act, for breach of fiduciary duty, unjust enrichment and wasting corporate assets.