uBiome, Inc.

FDA said Tuesday that it will allow the use of the Binx Health IO CT/NG Assay at point-of-care settings, such as in physician offices, community-based clinics, urgent care settings, outpatient healthcare facilities and other patient care settings. The test, which uses female vaginal swabs and male urine specimens, is designed to detect the presence of the bacteria Chlamydia trachomatis and Neisseria gonorrhoeae, which cause the sexually transmitted infections chlamydia and gonorrhea, respectively. The ability to diagnose at a point-of-care setting will help with more quickly and appropriately treating sexually-transmitted infections, expert says. FDA said it is taking swift action to get more COVID-19 tests for screening asymptomatic people on the market. The agency has authorized several COVID-19-related tests for over-the-counter (OTC) use and some for point-of-care use. The agency says that screening testing, especially with OTC tests, is an important part of the country’s pandemic response as many schools, workplaces,and other entities are setting up testing programs to quickly screen for COVID-19. And in case you missed our last Medtech in a Minute report... Vault Health and Everlywell are reaching out to DoorDash in an effort to make FDA-authorized COVID-19 test collection kits more widely available to consumers. The Vault Health COVID-19 Saliva Test Kit and Everlywell COVID-19 Test Home Collection Kit DTC will be available for same-day delivery through the DoorDash marketplace app. The two digital health companies will focus on 12 DashMart locations across the United States, including Baltimore, Chicago, Cleveland, Dallas, Denver, Minneapolis, and Phoenix, with more cities rolling out in the coming months. The Securities and Exchange Commission has filed litigation against the co-founders of San Francisco, CA-based uBiome, a now-defunct stool-testing company. They are accused of fraudulently raising millions of dollars and duping doctors into ordering unnecessary tests. The company developed and performed laboratory tests that purportedly identified microorganisms in the gut and genitals and assisted in the diagnosis of conditions such as inflammatory bowel disease and sexually transmitted infections.

In a case that smells a lot like Theranos, the founders of San Francisco, CA-based uBiome are facing federal charges for allegedly defrauding investors out of millions of dollars. The company developed and performed laboratory tests that purportedly identified microorganisms in the gut and genitals and assisted in the diagnosis of conditions such as inflammatory bowel disease and sexually transmitted infections. In 2018, Jessica Richman and Zachary Apte raised about $60 million in a series C round that valued uBiome at nearly $600 million, and enriched Richman and Apte by millions each through the sale of their own uBiome shares during the round. According to the Securities Exchange Commission (SEC) complaint, Richman, who was the CEO of uBiome, and Apte, who was its chief scientific officer, painted a false picture of uBiome as a rapidly growing company with a strong track record of reliable revenue through health insurance reimbursements for its tests. Richman and Apte also had a romatic relationship and married in 2019, the SEC noted. "Defendants also made numerous misrepresentations that were designed to assure investors that the company’s business model and its tests were widely accepted by health insurance companies and downplay any risks to the company’s revenue," attorneys representing the SEC said in the complaint. The SEC said uBiome's purported success in generating revenue, however, was a sham, as it depended on "duping doctors" into ordering unnecessary tests and other improper practices. Once their actions were discovered, insurers took back their previous reimbursement payments to uBiome, SEC said. uBiome employees allegedly raised concerns regarding the company's practices, but Richman and Apte failed to take action to remedy the improper practices. Rather than disclose those practices to investors, they tried to hide it from the company's general counsel, board, and insurers, and told employees to provide insurers with backdated and misleading medical records to substantiate uBiome's prior claims for reimbursement, according to the complaint. The house of cards collapsed around April 2019 when uBiome's board initiated an internal investigation, following the FBI’s execution of a search warrant at uBiome’s headquarters. "That investigation brought uBiome’s improper billing practices to light and made clear that uBiome’s business model was untenable," according to the complaint. uBiome suspended its clinical tests business and, in September 2019, ceased operations and filed for bankruptcy protection. The company is currently undergoing Chapter 7 bankruptcy liquidation. "We allege that Richman and Apte touted uBiome as a successful and fast-growing biotech pioneer while hiding the fact that the company's purported success depended on deceit," Erin Schneider, director of the SEC's San Francisco Regional Office, said in a statement. "Investors are entitled to know the material risks of the companies they are investing in, no matter how transformative those companies claim to be." The SEC's complaint, filed in federal court in San Francisco, charges Richman and Apte with violating the antifraud provisions of the federal securities laws. The SEC is seeking court orders, including officer and director bars, to prevent Richman and Apte from engaging in future fraud, as well as orders requiring them to disgorge their ill-gotten gains from the violations and pay civil penalties. In a parallel action, the U.S. Attorney's Office for the Northern District of California announced criminal charges against Richman and Apte. uBiome's story smells a lot like the Theranos story Unfortunately for medtech, this is a story that is becoming all too familiar. One company tested people's blood, the other tested people's poop. Both companies have been accused of bilking investors and misleading people regarding the success of their technology. The well-publicized story of Theranos' failures should have served as a cautionary tale for other medical device and diagnostic companies. The rise and fall of Theranos did not do the industry's reputation any favors, and if Richman and Apte are found guilty of the charges against them, it will be another hit to the industry. Back in 2016, MD+DI published advice from regulatory consultant David Amor on how to avoid ending up like Theranos. This seems like a good time for a refresher:

uBiome cofounders are in hot water after the SEC charged the pair with healthcare fraud conspiracies. The company first was founded in 2012 and started with direct-to-consumer microbiome testing. Now cofounders Zachary Schulz Apte and Jessica Sunshine Richman are being tried for a slew of charges, including conspiracy to commit securities fraud, conspiracy to commit healthcare fraud, money laundering and related offenses connected to alleged schemes to defraud health insurers and providers, according to a Department of Justice release. The company, which filed for Chapter 11 bankruptcy in 2019, came under investigation by the FBI for its alleged fraudulent insurance billing practices. At the time, the FBI raided the headquarters and required all employees to hand over computers. The SEC lawsuit claims that uBiome’s developed a clinical version of its microbiome test in order to attract venture dollars. The company landed $60 million in venture funding. The SEC claims these funds were fraudulently raised. The SEC goes on to allege that after it began marketing this version of the test the company used a number of methods to prompt clinicians to order the tests. Additionally, the indictment alleges that the cofounders developed and oversaw practices that deceived healthcare providers and insurance companies into ordering tests that were neither valid nor medically necessary. “uBiome’s purported success in generating revenue, however, was a sham. It depended on duping doctors into ordering unnecessary tests and other improper practices that Richman and Apte directed and which, once discovered, led insurers to claw back their previous reimbursement payments to uBiome,” the court filing reads. The defendants face seven counts of fraud that could incur up to 90 years in prison. “Today’s indictment alleges that in their efforts to move fast to drive business and investment capital to their microbiome start up, defendants turned a blind eye to compliance and pursued at all costs a path designed to bring the greatest investment in their company,” Acting U.S. Attorney Hinds said in a statement. “The indictment alleges defendants bilked insurance providers with fraudulent reimbursement requests, a practice that inevitably would result in higher premiums for us all. "Further, defendants cashed out on the investment that flowed into the company to benefit themselves. Today’s indictment is a cautionary tale about the importance of robust compliance programs rather than lip service, and the importance of honesty with investors.” WHY IT MATTERS These allegations not only put uBiome’s cofounders on trial, but also set an example for all other companies in the space. “This was the result of a very complex investigation conducted by the FBI and our federal and state partners,” FBI Special Agent in Charge Fair, said in a statement. “This indictment illustrates that the heavily regulated healthcare industry does not lend itself to a ‘move fast and break things’ approach, but rather to an approach of compliance and accountability.” THE LARGER TREND Health tech companies have seen their fair share of legal troubles in the past few years. One of the most notable cases is Theranos. In 2018, Theranos founder Elizabeth Holmes was charged by the SEC with ‘massive fraud.’ She and former Theranos president Ramesh “Sunny” Balwani were charged with raising over $700 million through exaggerated and fraudulent claims. Recently acquired Outcome Health’s founders also face a number of legal battles. A criminal indictment in the Northern District of Illinois charges former CEO and cofounder Rishi Shah, former President and cofounder Shradha Agarwal, former CFO Brad Purd, and former EVP Ashik Desai, with an alleged $1 billion scheme to defraud clients. Currently, the former executives are awaiting trial.