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.
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 (GOOGL), 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.