uBiome convinced Silicon Valley that testing poop was worth $600 million. Then the FBI came knocking. Here's the inside story.
- Silicon Valley health startup uBiome is in hot water on the heels of an FBI raid in April.
- Founded in 2012, uBiome raised $105 million from investors on the promise of exploring the microbiome, a 'forgotten organ.'
- As uBiome advanced from a citizen science project to a clinical testing company, it overstated the medical value of its tests and prioritized growth over patient care, according to insiders, lawyers, and government officials.
- "Some of my uBiome results remind me of astrology," one ex-employee said.
- uBiome may also have run afoul of federal and state regulations while running some of its tests, according to the experts, insiders, and documents.
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When the three founders of the "microbial genomics" startup uBiome began collecting human poop, they kept it in an erstwhile storage closet, inside second-hand freezers from a discount lab supply website. It was a far cry from a state-of-the-art facility.
But the setup matched uBiome's image at the time as a crowd-funded citizen science initiative that sought to seize knowledge about our bowels from lab scientists and place it in the hands of regular people.
It wasn't until roughly three years later, at the end of 2014, that the company established a lab space professional enough to be certified by government regulators. That certification was part of uBiome's attempt to transform itself from a fun, collaborative science project to a bonafide medical-testing outfit - one that could justify investments from high-powered VC firms like Andreessen Horowitz and 8VC and ultimately garner a $600 million valuation.
That transformation hasn't gone very well: At the end of April, FBI agents busted through the door of uBiome's San Francisco headquarters and executed a search warrant, collecting information from employees' computers and hauling away cardboard boxes full of evidence, CNBC reported. The warrant was reportedly part of an investigation into the company's billing practices.
But the problems at uBiome extended far beyond billing issues, according to interviews with 11 former employees across its billing, operations, marketing, and science, departments, as well as with customers, lawyers, and medical experts.
An increasingly frantic effort to show growth
uBiome, these sources say, presented conjectural science about gut microbes as medically sound in an increasingly frantic effort to convince health insurers to pay for it. When not enough new customers were signing up for uBiome's services, the former employees say, the company tried to bill insurers for conducting updated tests of stored samples that were in some cases years old.
When the insurance companies required assurances from doctors that the tests were medically necessary, the sources say, uBiome hired doctors to remotely sign off on tests using tactics that appear to violate the regulations of some states governing telemedicine.
These actions were guided by two co-founders who are described by former employees as secretive and intimidating, whose romantic relationship was unknown to investors and co-workers, and one of whom led reporters to believe she was younger than she actually was.
Those co-founders, Jessica Richman and Zachary Apte, were placed on leave after the FBI raid. (uBiome's third cofounder, Will Ludington, left the company in 2013 and declined a Business Insider request for an interview.) uBiome said it is conducting its own independent investigation into how it billed customers for its tests, and General Counsel John Rakow has been named interim CEO.
In a statement provided to Business Insider, a spokesman for Richman and Apte described complaints from former employees as "misinformed speculation, gossip, and innuendo," adding that "without knowing who is making these unsubstantiated claims, one can only speculate as to their agendas, motivations, actual knowledge of uBiome's business, seniority, or length of tenure with the Company."
uBiome said in a statement that Apte and Richman "have no current involvement in company operations" and that an investigation of the company's billing practices is underway:
[T]he Board and management team have taken strong and swift action to address the issues that have come to light, including implementing a new code of ethics and initiating an independent review of uBiome's billing practices. As we work diligently to restore the company's credibility and the integrity of its leadership, we will take any corrective actions that are needed to ensure uBiome becomes a stronger company. There is significant clinical evidence and medical literature that demonstrates the utility and value of uBiome's products as important tools for patients, healthcare providers, and our commercial partners, and the company looks forward to continuing to demonstrate this clinical utility and value at a time of growing demand in the market.
Winning a spot at a prestigious incubator to explore the 'forgotten organ'
Richman, Apte, and Ludington founded uBiome together in San Francisco in 2012, when the three were graduate students. Richman was studying in England at Oxford at the time; Apte and Ludington were studying at the University of California in San Francisco.
In 2012, Apte and Ludington landed uBiome a prestigious spot at a funding and mentorship hub with lab space called the QB3 Garage at UCSF. QB3 has partnerships with pharmaceutical giants like Roche, Bayer, and Johnson & Johnson; successful companies like Zymergen and Alector are alumni.
The same year, they launched an Indiegogo campaign to raise money for their new startup. At the beginning, uBiome pitched its poop tests as fun, educational tools. The microbiome - another word for the bacteria that live inside the human body - was increasingly being eyed by researchers as potentially influencing everything from digestive diseases to mental illness. Using uBiome's simple swab kit and some toilet paper, any customer could gather data on this so-called "forgotten organ."
But in the fall of 2016, uBiome switched gears. In addition to its casual, informational kits, the startup made plans to market its tests as medical tools, according to emails that Business Insider viewed. With these new tests, patients and doctors could learn about the risk of diseases and get other information to improve patients' health, uBiome claimed in emails, social media ads, and on its website. And because the new tests were clinically useful, they would be covered by health insurance, the company claimed.
A Harvard geneticist and a $15.5 million investment
It was around this time that uBiome began to attract the attention of investors, renowned scientists, and the media. In February 2016, Fast Company named uBiome one of the world's top 10 "most innovative companies in healthcare." Shortly after that, the company named renowned Harvard geneticist George Church to its advisory board. Then in November, uBiome scored its first big investment: $15.5 million in a round led by Silicon Valley venture firm 8VC, known for backing successful biotechs like cancer-testing company Guardant Health. All told, uBiome would raise $105 million from investors.
Read more: A renowned Harvard geneticist and MacArthur 'genius' were among the 75 scientist advisers for embattled $600 million poop-testing startup uBiome. But 'they were pretty much there for show.'
In 2017, uBiome began emailing purchasers of its earlier, educational kits and encouraging them to "upgrade" to a new, medical-grade test called SmartGut. The new test would include a clinical report with "information on beneficial and pathogenic microorganisms associated with specific infections, lifestyle choices, and gut conditions," according to an email that Business Insider viewed. uBiome also offered to contact the customers' personal physicians, who they said would help them order the tests and explain their results.
But SmartGut was not ready to be used as a clinical tool, several ex-employees told Business Insider.
Part of the problem is that the science of the microbiome remains in its infancy, and testing stool only provides a small glimpse of what's going on throughout the roughly 30 feet of material that make up the human gut. Some experts say it will be years - perhaps decades - before tests like uBiome's have real-world applications for diagnosing diseases.
"Overall, our current understanding of the precise relationships between the human gut microbiome and disease remains limited," concluded the authors of one recent review of microbiome studies published in the journal Nature Communications.
"SmartGut is not ready for a clinician to order one kit and give a diagnosis," said Elisabeth Bik, a molecular biologist and former Stanford researcher who served as uBiome's science editor until December 2018, in an interview with Business Insider.
Indeed, the "upgrades" that uBiome was selling were not really upgrades at all, according to ex-employees, emails, and internal documents.
'Yes, I would like to upgrade'
The email asked Nancy if she'd like to "upgrade" from one uBiome test to a newer, clinical-grade test, free of charge. She wouldn't have to send the company another sample, it said.
Nancy replied, asking whether the company would really be re-testing samples she'd submitted in the spring of 2014. Richman responded to her personally: Yes, uBiome would re-analyze the fecal specimen Nancy had sent in three years earlier.
The new report, she was told, would assess her risk of serious diseases like irritable bowel syndrome and other conditions of the gut. uBiome, the email said, would send Nancy's request for the new test to a doctor who would review her case and approve it.
All she had to do was click a button in the email reading, "Yes, I would like to upgrade," and then provide her insurance information and a list of the symptoms she was experiencing.
There was one problem, however: The poop sample uBiome promised to re-analyze had been sent to the company in March 2014, about eight months before uBiome's lab was certified by the Centers for Medicare and Medicaid Services as a space rated to perform medical tests under the Clinical Laboratory Improvement Amendments, or CLIA.
The CLIA rules govern any company or service that performs tests on "materials derived from the human body," such as blood, saliva, urine, or stool, and are designed to ensure that laboratories meet standards of cleanliness and reliability appropriate for healthcare.
Running tests on old samples that were "not maintained to ... standards"
During those pre-CLIA months, uBiome did not meet the storage rules for frozen stool samples, an ex-employee told Business Insider. One of those rules mandates that lab staff regularly log the temperature of the freezers in which samples are kept. uBiome staff were not logging temperatures, the ex-employee said, because the freezers lacked adequate temperature monitors.
"Those samples were not maintained to CLIA standards," the ex-employee said.
A CMS spokesperson told Business Insider that uBiome received its first CLIA certificate on December 18, 2014.
But in the 2017 email blast to customers like Nancy, uBiome made clear they could opt into its new clinical test without sending in a new poop sample, meaning that uBiome could have re-tested thousands of 5-year-old poop samples kept in potentially substandard laboratory conditions and then used the data from those old samples to give medical advice.
Experts in lab storage and fecal samples told Business Insider that three-to-five years is too long to ensure that any data gleaned from the samples is valid. Even if the data from the samples proved to be somewhat useful, it would not be appropriate to use it to make medical decisions, they said.
"It seems problematic that physicians were issuing orders based on that stale information, or lack of information," said Deborah Gardner, a partner who specializes in health care at the law firm Ropes & Gray.
uBiome needed to run the new clinical tests because Apte and Richman had shared optimistic revenue projections with their investors that were based on acquiring large numbers of so-called "billable samples," or poop vials that they could charge to test, according to ex-employees. When there weren't enough new samples to bill, they attempted to make the old ones billable again, according to internal messages viewed by Business Insider.
In one message, an employee expressed concern that the number of incoming samples was declining. In response, Jennifer Gerstenberger, uBiome's vice president of communications, told the employee not to worry because the company was getting people to "upgrade" by sending out emails.
"With upgrades in various states of review ... we should be closer to the 17,000-18,000 mark once all is said and done," Gerstenberger wrote in a message over Slack accompanied by a smiley face emoji. "More emails to go out soon!"
"Samples were slowing down. They were trying to find any reason why we should bill again for the samples that were in-house," a former employee told Business Insider.
One former customer told Business Insider he declined to "upgrade" because the emails he got from uBiome were so incessant. "The emails were insane," he said. "Almost daily."
The growth strategy was aggressive, according to ex-employees. uBiome would sometimes encourage people to take as many as six tests, billing insurers up to $3,000 for each one, Business Insider previously reported.
Ex-employees say uBiome 'quickly became a place where you couldn't disagree'
Former uBiome employees described a work culture of intimidation and secrecy where blindly following directions was encouraged and asking questions was frowned upon.
All of the ex-employees said the intimidation came directly from Richman and Apte. One employee said Apte would "just run people over emotionally, yelling at them that their work wasn't valuable" and that "their experience didn't matter." Victims of Apte's attacks described it as "being Zac'd." Others complained that they were micromanaged and said Richman and Apte would do things like request their personal laptop passwords as a means of ensuring loyalty.
"People would literally sneak out the back door of the office when they heard Zac come in to avoid being attacked," one ex-employee said.
All of the ex-employees said that what initially drew them to uBiome was its alleged culture of openness, where ideas and data were shared among employees and the wider scientific community. One ex-employee said Richman further convinced him that those priorities were important to the company within their first few days at uBiome.
"In your first meeting with her, Jessica looks into your eyes and tells you you're the best person on Earth and you're doing the most important work across the whole company," they said.
But within anywhere from several weeks to several months, it would become apparent that none of that was truly the case, they said.
One ex-employee who tested themselves repeatedly with uBiome kits, for example, noticed their results would change dramatically from one test to the next. When they began asking questions about that, Richman told them to keep quiet, they said.
"Anyone who got promoted at uBiome were the yes-men," the ex-employee said. "It quickly became a place where you couldn't disagree. Those who were blindly loyal were awarded promotions."
Richman and Apte also concealed personal details, including their romantic relationship and Richman's age, according to six former employees, as Business Insider previously reported. Richman presented herself as younger than she was in an apparent effort to be included in articles showcasing young founders.
In 2018, Richman told a Business Insider reporter that she was "under 40" and declined to give her age. That earned her a spot on a list of healthcare leaders under 40 "who are using technology to shape the future of medicine." At the time, she was 44. In 2015, when Richman was 41, she was included on a CNN list highlighting innovative companies led by founders under 40. A CNN spokesperson told Business Insider that Richman confirmed to a CNN reporter in an email that she was under 40.
The spokesman for Richman and Apte said the couple "behaved professionally by not publicly discussing their personal relationships at work," but denied that they were ever untruthful with employees. As for Richman's inclusion on lists that she was too old for, he said it wasn't her problem: "Business Insider wants to claim that it was Dr. Richman's responsibility to notify the paper when it erroneously included her on an award list and wants to recast its own error as if Dr. Richman was deliberately untruthful."
He added that Richman and Apte "promoted a work culture based on respect and openness. The company encouraged employees to report concerns through a number of available anonymous and all-company forums."
uBiome's short lived stint with birth control startup Nurx
Around the same time that uBiome was pitching its new clinical tests to customers, the company was also reaching out to doctors.
On LinkedIn, uBiome staff would message physicians and ask if they would consider recommending the tests to their patients and even stock the kits in their offices, according to one doctor who was contacted by uBiome and spoke to Business Insider anonymously out of fear of retribution.
According to ex-employees and internal messages, few clinicians were responding to uBiome's pitch. And those who did agree to recommend uBiome's tests to patients weren't doing it frequently enough.
So in the spring of 2017, uBiome started working with the startup Nurx, which sells prescription birth control online. Nurx recently came under fire after a New York Times investigation accused it of dispensing medicine directly from its corporate office without a pharmacy license and letting sales staff influence medical policy decisions. (Nurx has said that patient safety wasn't at risk and said examples cited by the Times were taken out of context.)
Former CEO Hans Gangeskar co-founded Nurx in November 2014. He was also an employee at uBiome at this time, where he served as its vice president of product from January 2014 to January 2015, according to his LinkedIn profile. After requesting written questions from Business Insider, Gangeskar did not respond to them. Nurx also did not respond to several Business Insider requests for comment.
Nurx already had a network of physicians that it used to issue prescriptions for its customers. Since uBiome couldn't get enough customers to order tests through its doctors, and couldn't convince enough doctors to order tests for their patients, it decided to market its tests directly to consumers online and use Nurx's doctors to sign off when people ordered them directly through its web site, according to two ex-employees.
Known as telemedicine, the process is increasingly common among healthcare startups that need doctors to sign off on prescription drugs and procedures. In some cases, patients and doctors may talk by video or on the phone before the doctor approves the medication or test. In others, patients may order a medication like Viagra online and then simply fill out a form or provide images to doctors to verify their identity and medical need.
Was uBiome running afoul of state telemedicine laws?
Laws regulating the kind of medicine that uBiome and Nurx were practicing vary significantly by state. Because many states require patients to provide some kind of proof of identity in order to receive a prescription or a doctor-ordered test, it has become standard industry practice to require patients to submit a photo ID, according to Alex Bargar, the vice president of clinical services at contact lens company Simple Contacts.
Nurx complied with these guidelines by requiring patients to submit a photo of their driver license. When it began working with uBiome, it requested that uBiome also require photo IDs.
Engineers at uBiome created a simple system that allowed patients to upload a photo attachment. In one case, according to an insider, a patient uploaded a photo of a dog instead of a photo ID. That test was approved by a doctor, the person said, suggesting that no one was checking the photos that patients were uploading. (Internal messages suggest that uBiome employees thought Nurx was responsible for validating the photos.)
Richman and Apte's spokesman said that all doctors in uBiome's "external clinical care network" were "licensed in the states in which they practiced medicine," adding: " To Drs. Richman and Apte's knowledge, uBiome's screening tests were not marketed as diagnostic tests. Further questions related to uBiome's policies should be directed to uBiome."
After a few months, according to insiders, the leadership at uBiome grew concerned that the Nurx partnership wasn't lucrative enough. Nurx's clinicians were taking what uBiome saw as too long - more than a week - to review test requests. Nurx was also only operating in a handful of states at the time. uBiome wanted more, the insiders said, so it terminated the agreement and began once again recruiting doctors on LinkedIn.
Approving tests without reviewing medical records
After the Nurx partnership ended, uBiome again allowed patients to order its tests without providing photo IDs, according to one doctor who reviewed uBiome test requests for a year and a half.
uBiome didn't require patients to provide medical records or other proof of their conditions, according to the physician. In about 90% of cases, he said, he ordered a uBiome test based on symptoms the patients listed in an online questionnaire they'd filled out when they'd ordered the test online.
He did not consult with patients beyond that, he said. One uBiome customer told Business Insider he ordered several tests without answering any questions about symptoms on the questionnaire, however. Each time, he said, his tests were approved.
The doctor said he approved orders for "several" uBiome tests per week, or anywhere from 200 to 600 tests total. He rejected "very few" orders, he said.
"I viewed it as a tool patients can use, so I didn't have any issue with allowing patients to get it," he said.
The lack of medical records became a problem when it came to billing the tests to insurance, though, according to one ex-employee. "Insurance companies were asking for medical records and uBiome couldn't provide them," the ex-employee said.
In the fall of 2018, as Business Insider previously reported, insurance company Aetna flagged uBiome's billing practices and stopped providing reimbursement for uBiome's tests. The health insurer Anthem also raised flags about uBiome's billing, CNBC reported.
The limits of the microbiome
In ads, emails, and on its website, uBiome presented its tests as providing patients with "actionable insights" they could use to improve their health.
"SmartGut is the world's first sequencing-based clinical microbiome screening test based on our patented technology and extensive peer-reviewed research," read uBiome's website. "The test detects beneficial and pathogenic microorganisms associated with gut conditions like irritable bowel syndrome (IBS), and inflammatory bowel disease (IBD), including ulcerative colitis and Crohn's Disease."
But experts say the field of microbiome science may be too young for these kinds of insights. Any test that aims to provide a glimpse into the various bacteria thriving there can only do just that - provide a snapshot of what's going on internally.
Large scale studies have yet to show a solid link between specific bacterial groups and specific diseases, according to scientists. Researchers have also not yet proven that these imbalances can be corrected with a specific diet or specific foods.
"Microbiome research has few established and standardized experimental and analysis methods, and individual studies often provide inconsistent or conflicting results," the author of one recent study concluded.
Three ex-uBiome employees told Business Insider they were aware of these limitations and raised questions about them - and about uBiome's tests - to Richman and Apte. But neither Apte nor Richman addressed their concerns, according to the ex-employees. Instead, they were told to stop asking questions, they said.
"She'd basically just say, 'Go away,'" one ex-employee said.
"The importance of the microbiome to human health is supported by the work of hundreds of scientists and physicians who have published extensive peer-reviewed research," said Richman and Apte's spokesman. "Scientists with no affiliation with the company have been studying the microbiome for over a decade."
Was SmartGut really smart?
I learned about the product's limitations when I took one of uBiome's non-clinical tests in December. I took the Explorer test, which is available without a prescription for $89. In practice, insiders told me, there isn't a huge difference between SmartGut and Explorer.
"SmartGut and Explorer are the same thing," one insider, who alleged that both tests use the same datasets and analysis, said.
The biggest difference between the two tests, they said, is that Explorer shows hundreds of different microbes in the gut, while SmartGut only lists several dozen. That could mean that one person could pay $89 for an Explorer test and another person could order a SmartGut test (and have their insurance billed for up to $3,000) and both customers would come away with similar results.
Rusha Modi, a gastroenterologist at the University of Southern California, walked me through my uBiome Explorer results, and told me that one Explorer test couldn't tell me much about my health.
The main reason why has to do with the fact that our gut's bacterial makeup changes constantly - sometimes as frequently as every hour.
"Some of my uBiome results remind me of astrology," said one ex-employee who tested himself several times using uBiome's SmartGut and Explorer tests. "You get one SmartGut report and you might say say, 'Oh, well that totally explains why I've been having such-and-such problem.' Then you do it the next day, and you get completely different results," they said.
Taking a test like the Explorer and using it to learn something about my health, Modi said, would be like taking a photo of a garden one afternoon and using to learn how well the garden was doing year-round. Everything from the seasons to the weather that afternoon could influence how the garden appeared in the photo.
To get a complete picture of what was really going on in my gut, I'd need to get a full workup from a specialist, Modi said.
In addition to its constantly-changing nature, the gut microbiome is complex for another, much simpler reason: Our guts are really long. The whole digestive system is estimated to be roughly 30 feet. So poop samples, which come from material in the rectum, may only provide a tiny glimpse of what's going on.
"It's the Wild West in the microbiome," one former uBiome employee said. "It's nowhere near ready for clinical applications."
Emma Court and Lydia Ramsey contributed reporting.
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