Table of Contents
All notes are based on allegations from the FBI & SEC as well as reporting from the WSJ. This Week in Startups is not making any new claims against uBiome, just aggregating the publicly available alleged story.
Top Takeaways
- uBiome doesn't appear to have started with malicious intent, but the original business model selling tests to curious consumers was not going to be "venture scale."
- When the uBiome founders realized the DTC market was not going to be sufficient, they "pivoted" to using insurance companies paying on behalf of the customer.
- Insurance companies are rigorous about what they reimburse and require doctors to use their clinical judgment to order a test.
- Convincing both patients and their doctors that this test was necessary for their health was too slow. So uBiome used a simple form, and pumped patients through a set of telehealth doctors they recruited.
- That process partially worked, uBiome was paid more than $35 million out of the $300M in claims they filed to insurers between 2015 and 2019. But insurance companies asked to see the Dr. notes from the visits that deemed the tests necessary. The notes didn't exist, so uBiome forged them.
- Pressure from the insurance companies increased, and in April 2019 the FBI raided the uBiome office, shortly after, the founders stepped down. In Sept 2019, uBiome declared bankruptcy. This was only 1 year after they raised an $83m round at a $600m valuation!
- Not all the value was destroyed, the married co-founders had sold $12m of stock in a secondary sale and are now on the run!
The Situation
- Two former co-executives of the now-bankrupt lab-testing startup uBiome were charged with healthcare and securities fraud (among other offenses) in a 33-page indictment dropped by a federal grand jury in San Francisco!
- They allegedly:
- Misled investors about their revenue numbers while cashing out $12M in secondary
- Filed fraudulent reimbursement claims with insurers for lab tests that weren’t validated or necessary for patients
- Submitted fake chart notes from doctors to justify the tests when insurers questioned their validity
Guest: Amy Dockser Marcus | @AmyDMarcus