Health tech start-up uBiome suspends clinical operations following FBI raid

Key Points
  • Following an FBI search at its San Francisco offices, uBiome tells customers that it has temporarily suspended clinical operations.
  • The company has temporarily stopped selling its SmartGut and SmartJane tests, it says.
  • Its cofounders are on administrative leave, while the board conducts its own investigation into uBiome's billing practices.
The FBI raided uBiome's San Francisco office on April 25

In an email to its customers, uBiome, a start-up that sells health tests, said on Monday that it is suspending clinical operations for its health tests, including SmartGut and SmartJane.

That decision follows the news that the FBI searched the company's San Francisco offices as part of an ongoing investigation into the start-up's billing practices.

The company noted that it would continue to sell its direct-to-consumer product, Explorer. Any recent SmartGut or SmartJane tests will be cancelled, and payments for any out-of-pocket tests will be refunded, it said.

In the months before the FBI search, the company would often bill insurance multiple times for its tests without patient consent, insiders told CNBC. In an interview, one customer, Marc Harris, told CNBC that he sent in two samples, but the $2,970 test was billed to his insurance five times.

The company's founders, Jessica Richman and Zac Apte, are on "administrative leave," the company announced last week, and John Rakow, its general counsel, was named interim CEO. The board also said that it would launch an independent investigation into uBiome's billing practices.

UBiome declined to comment on the email.

Here's the full email, obtained by CNBC:

On Friday, April 26, 2019, federal authorities, pursuant to a search warrant, searched uBiome's facilities in San Francisco. We are cooperating fully with federal authorities on this matter.

Our Board of Directors has appointed John Rakow, our General Counsel, as Interim CEO of uBiome, effective immediately.

Our Co-CEOs, Jessica Richman and Zac Apte, are currently on administrative leave as we conduct an independent investigation into the company's billing practices, to be overseen by a Special Committee of the Board. Once complete, 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.

We will also be temporarily suspending clinical operations. At this time and until further notice, uBiome will not be offering SmartGut or SmartJane. We will continue to offer and process our Explorer product.

It is important to reiterate that this is a suspension. This does not mean we will not offer clinical products in the future, nor does this insinuate a lack of value or utility in our products. There is significant clinical evidence that demonstrates the utility and value of uBiome's products as important tools for patients, healthcare providers, and our commercial partners. We look forward to continuing to demonstrate this clinical utility and value.

Any SmartGut or SmartJane request or order that is pending on your account has been canceled. If you made any out of pocket payment upfront, this will be refunded to you within 3-5 business days. We will not be releasing clinical reports, processing samples, billing health insurance, or shipping new collections kits, at this time. If you would prefer that any of your pending samples be destroyed, simply reply to this email. Our team will ensure this is taken care of for you expeditiously.

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