Here is a story about a promise to disrupt the health care industry with a new revolutionary product. A married couple received millions without having to prove a success, and have been charged with multiple federal crimes, including fraud.
Zachary Schulz Apte and Jessica Sunshine Richman met in 2012 at a tech incubator used by the University of California-San Francisco. There, the couple founded uBiome, a direct-to-consumer service they called “Gut Explorer” that would analyze fecal samples sent by customers, SFGate reported. The company promised that its consumers would learn about the micro-organisms that lived in and on every human being. With that knowledge, they would be better able to understand health issues surrounding their digestive systems, such as irritable bowel syndrome (IBS).
uBiome would later go to release two other tests for consumers. SmartGut was their first new test that would be able to tell consumers which of the microorganisms within them were causing their digestive issues. SmartJane would be added in a few short years afterward which was focused on women. This test would analyze vaginal samples to claim that it could screen for HPV, sexually transmitted infections (STIs), and overall vaginal health.
Silicon Valley investors 8VC and Andreessen Horowitz funded uBiome after it raised over $350,000 in an initial crowdfund on empty promises, and unproven science, SFGate reported. The company was once valued at $600 million and considered one of the biggest startups to invest in. Richman even received an award from Gwyneth Paltrow’s company, Goop.
A raid from the FBI was what was needed to prompt the company to suspend its SmartGut, and SmartJane tests. This was because customers’ insurance companies were billed numerous times for the same tests. One consumer that sent in two samples informed the outlet that his insurance company was billed five times.
That is just a small part of the scheme the couple was charged with last week. As SFGate reported, uBiome “sought upwards of $300 million in reimbursement claims from private and public health insurers between 2015 and 2019.” The company would send insurance companies multiple reimbursement claims for the same tests. This dirty scheme would allow the company to receive $35 million in reimbursements for tests that prosecutors said: “were not validated and not medically necessary.”
“Much like the high-profile collapse of Elizabeth Holmes’ Theranos blood-testing business, prosecutors allege Apte and Richman assured investors their medical tests were reliable when, in fact, they weren’t,” SFGate reported. In its complaint, the U.S. Securities and Exchange Commission said the couple “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. UBiome’s purported success in generating revenue, however, was a sham.”
Apte and Richman were indicted last Thursday “on multiple federal charges, including conspiracy to commit securities fraud, conspiracy to commit health care fraud and money laundering,” SFGate reported. In addition, the outlet reported, they “are also accused of falsifying documents, lying and concealing facts about their billing model when asked by insurance providers, as well as misleading and defrauding their investors.”