UBiome, a microbiome-related startup under FBI scrutiny for its billing practices, announced Wednesday that its co-chief executives had been placed on administrative leave and that it had launched its own independent investigation into the matter.

In a statement, the company said founders Jessica Richman and Zac Apte were no longer serving as chief executives. UBiome’s board named general counsel John Rakow as interim CEO.

“I want all of our stakeholders to know that we intend to cooperate fully with government authorities and private payors to satisfactorily resolve the questions that have been raised, and we will take any corrective actions that are needed to ensure we can become a stronger company better able to serve patients and healthcare providers,” Rakow said in a statement.

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The independent investigation will be overseen by a special committee, the company said. It provided no other details.

Federal agents searched the company’s San Francisco offices last week. An individual familiar with the matter said the FBI has heard allegations related to how the company bills insurers for its microbiome tests and how physicians who order uBiome tests for customers via a telemedicine service are paid.

UBiome is a leader in a burgeoning industry of microbiome testing, in which companies are seeking to analyze the bugs in consumers’ guts to provide various kinds of health information. Richman, who had previously worked for Google, McKinsey, and Lehman Brothers, and Apte, an entrepreneur, co-founded the company in 2013.

With uBiome’s clinical tests, which must be ordered by a physician, customers swab their stool, vagina, or nose and mail in a sample. The company sequences the different microbes in the sample to try to offer insights about their customers’ health.

UBiome works with a group of physicians who order the tests through a telemedicine service, a standard practice for companies selling their products online. But some of the allegations reported to the FBI involve the way the physicians were paid for referring patients for the tests. The FBI has also heard allegations that uBiome changed certain billing codes for insurers in a way that might be illegal.

In an interview two weeks ago with the Wall Street Journal, which first reported the FBI action last week, Richman said that “compliance is our highest value” and defended its billing practices.

California’s insurance department is also examining the company’s billing practices, the Journal reported, as are a number of private insurers.

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  • I am a customer of Ubiome and I’ve found their service valuable. They have different products – one is called Explorer and you can order it directly. I did the “Explorer” kit first to help me figure out what was happening with my gut following a c-diff infection. My physician had suggested that I avoid gluten and dairy and take a lot of probiotics, which helped only moderately.

    Thats when I wrote them to ask about their other product called SmartGut. They explained that had to be ordered via a doctor, but my insurance would cover it. I was a little surprised because my insurance isn’t great, but they did indeed pay for it. I never met, talked to or otherwise communicated with the doctor who “prescribed” my test, which I suspect is what got them into trouble as surely that doctor was paid. I was surprised when her prescription called for doing testing every two weeks which seemed a bit extreme. I ended up only doing one test as I didn’t know if my insurance would pay for it and they offered no price for the test kit. Their other kit is $89 and I assumed the clinical kit would be more expensive.

    Having said that, that test showed I had some alarming results. They were listed along with a lot of disclaimers that it wasn’t a diagnosis, just that I had certain microbes present or not present, and at which levels. I shared the pdf of my results with my own physician. As it happened, my SmartGut test identified the presence of bacteria connected with Crohn’s Disease and ulcerative colitis. My doctor was able to confirm the latter with a diagnosis via a colonoscopy and blood tests. Worth noting: I had a full physical and a colon tests via a fecal sample and it did not turn any of this up.

    So their prescription process was definitely sketchy but their service was valuable to me. I just ordered a new Explorer kit to see how my biome has reacted to my treatment and my dietary changes.

  • the whole enterprise was riddle with red flags since the beginning.
    a tweet of mine from months ago:
    “Could someone explain to me how, two co-founders (with less than crystal clear academic backgrounds) with no discernible expertise in microbiome, genomics, or anything related to gut biology can manage to convince people to invest, first $350K via crowdfunding, and then $100M?”

    As they say, a VC sucker is born every minute. Or, …. I told you so

    • Well, regarding the investors are suckers comments, I guess in UBiome’s case, they were just filling the void for suckers left by Theranos’ exit.

    • I’m also confused. Why would a doctor order this test? And “the allegations reported to the FBI involve the way the physicians were paid for referring patients for the tests” which makes me think the only way they were getting business was by violating Stark laws, which prohibit against kickbacks. It isn’t “the way the physicians were paid,” but the fact they were paid at all. It is highly improper for a doctor to be directly compensated in this way. This could bite anyone who cashed a check for ordering this test, as it should.

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