• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

MassDevice

The Medical Device Business Journal — Medical Device News & Articles | MassDevice

  • Latest News
    • Cardiovascular
    • Orthopedics
  • Wall Street Beat
    • Funding Roundup
    • Mergers & Acquisitions
  • Podcasts & Webinars
    • Podcasts
    • Webinars
  • Resources
    • About MassDevice
    • Newsletter Signup
    • Leadership in Medtech
    • Manufacturers & Suppliers Search
    • MedTech 100 Index
    • Videos
    • Whitepapers
  • DeviceTalks Tuesdays
  • Coronavirus: Live updates
Home » Feds charge medical testing company with fraud

Feds charge medical testing company with fraud

March 19, 2021 By Sean Whooley

UBiomeA federal grand jury has charged the uBiome co-founders with multiple federal crimes, including two fraud charges, money laundering and more.

Now bankrupt, uBiome was founded by Zachary Apte, 36, and Jessica Richman, 46, in 2012 as a medical testing company that performed diagnostic analysis on fecal samples.

The company offered a direct-to-consumer service called “Gut Explorer,” which allowed an individual to submit a fecal sample to be analyzed by uBiome in its laboratory, after which the company would produce a report comparing the customer’s microbiome to the microbiomes of others who submitted samples. All the analysis and reporting was priced at less than $100 for the consumer.

Apte and Richman were charged with conspiracy to commit securities fraud, conspiracy to commit health care fraud, money laundering and related offenses connected to their alleged schemes to defraud health insurance providers and investors to raise capital for uBiome, according to a U.S. Dept. of Justice news release.

The duo was indicted on allegations that they had expanded uBiome’s business model to include the development and marketing of “clinical” tests regarding gut and vaginal microbiomes. Tests would be used by medical professionals to make decisions and uBiome would seek reimbursement from insurance providers that would reach up to nearly $3,000, according to the DOJ.

Allegedly, Apte and Richman aimed to develop “clinical” tests and bill insurance companies to attract large-scale investments. The company began to market its “clinical” version of a test just before raising millions in a Series B round. After beginning to market the test, the indictment alleges, the co-founders sought to secure healthcare provider orders for the tests by various methods, including having its chief medical officer review test requests from customers and building a network of providers outside of uBiome.

Apte and Richman also allegedly adopted fraudulent practices surrounding the tests by deceiving healthcare providers and reimbursing insurance providers regarding tests that were not validated and not medically necessary, the government claims. The indictment also alleges that the defendants falsified documents and lied about concealed material facts when asked questions by insurance providers that would have revealed the fraudulent actions they had undertaken.

Included among the alleged practices is the fraudulent submission of reimbursing claims, using a captive network of doctors and providers who were given partial and misleading information about the test requests under review, fraudulently submitting reimbursement claims for unvalidated tests, manipulating dates of service to hide actual practices and maximize billings, fraudulently not charging patients for patient responsibility and instead incentivizing them with gifts and then lying about such gifts, and finally, falsifying documents.

Between 2015 and 2019, uBiome allegedly submitted more than $300 million in reimbursement claims to private and public health insurers. From those claims, the company was paid more than $35 million.

In addition to those allegations, the indictment also claims that Apte and Richman oversaw an effort to deceive and mislead investors, particularly with regard to the company’s business model in terms of revenues and reimbursement rates, as well as threats to future revenues thanks to the company’s failure to collect patient responsibility. The lack of clinical utility and acceptance in the medical community of the company’s test also played a role in the alleged deceit, federal prosecutors charge.

The indictment alleges that the duo managed to get investors to contribute more than $64 million in uBiome stock during its Series B and Series C financing rounds, with the co-founders allegedly selling investors more than $12 million of their personal stock during the rounds.

Finally, the defendants are also alleged to have engaged in aggravated identity theft by engaging in wire fraud and securities fraud with the proceeds of the alleged unlawful activities. The indictment claims that Apte used more than $10,000 in proceeds from the scheme to defraud investors and make a $2.25 million payment to a law firm and deposit $500,000 in a bank account.

Additionally, Richman is alleged to have used more than $10,000 from the scheme to defraud investors and make payments related to property in Washington and Florida, while also allegedly purchasing an annuity from a life insurance company, paying a law firm $2 million for a legal retainer and transferring $900,000 as partial payment for a purchase of a residence in Florida.

“The innovation that emerges from our Bay Area companies is unparalleled, but all innovation must exist within the boundaries of the law,” acting U.S. Attorney Stephanie M. Hinds said in the DOJ release. “Today’s indictment alleges that in their efforts to move fast to drive business and investment capital to their microbiome startup, defendants turned a blind eye to compliance and pursued at all costs a path designed to bring the greatest investment in their company. The indictment alleges defendants bilked insurance providers with fraudulent reimbursement requests, a practice that inevitably would result in higher premiums for us all.

“Further, defendants cashed out on the investment that flowed into the company to benefit themselves,” Hinds said. “Today’s indictment is a cautionary tale about the importance of robust compliance programs rather than lip service, and the importance of honesty with investors.”

“This was the result of a very complex investigation conducted by the FBI and our federal and state partners,” added FBI Special Agent in Charge Craig D. Fair. “This indictment illustrates that the heavily regulated healthcare industry does not lend itself to a ‘move fast and break things’ approach, but rather to an approach of compliance and accountability.”

Filed Under: Business/Financial News, Diagnostics, Featured, Genomics/Molecular Diagnostics, Legal News Tagged With: U.S. Justice Dept. (DOJ), uBiome

In case you missed it

  • CeQur is launching a discreet, convenient ‘wearable insulin pen’
  • Teva appoints former Vertex exec as new head of R&D, CMO
  • Enovis partners with Kelvi on hot and cold therapies
  • West Pharmaceutical Services debuts new needle syringe system
  • Titan Medical names Cary G. Vance as new president, CEO
  • Acutus completes first closing in left-heart access portfolio sale to Medtronic
  • FDA clears Intuitive, Siemens Healthineers imaging integration for robotic bronchoscopy
  • FDA backs COVID-19 boosters with BA.4/5 spike proteins for fall
  • How safe is health information after the overturning of Roe?
  • Smith+Nephew opens new plant in Malaysia
  • BD launches combination COVID-19, flu, RSV diagnostic test
  • Zimmer Biomet creates independent nonprofit organization to reduce health disparities
  • Dexcom focuses on early diabetes diagnosis as COVID links emerge
  • Nasdaq grants Titan Medical 180-day extension to regain compliance
  • Aerin Medical reports positive 4-year results for VivAer treatment
  • Blackrock Neurotech and Pitt work on first at-home BCI system for remote trials
  • How medical device companies are responding to abortion bans

RSS From Medical Design & Outsourcing

  • Supply Chain EVP Greg Smith sees fewer suppliers in Medtronic’s future
    All eyes are on Medtronic’s global operations and supply chain leader as he works to modernize its operations and scrutinize suppliers. EVP of Global Operations and Supply Chain Greg Smith anticipates fewer suppliers in Medtronic’s future, he said in an interview this week. Smith spoke with DeviceTalks Editorial Director Tom Salemi in his first published… […]
  • CeQur is launching a discreet, convenient ‘wearable insulin pen’
    CeQur designed its Simplicity device to make insulin delivery as seamless as possible for people with diabetes. When it comes to managing diabetes, CeQur wants to make insulin therapy as convenient as possible. For those who prefer to manage their own insulin delivery, the Simplicity device might just do exactly that. Simplicity, a wearable, disposable… […]
  • Meddux opens new facility in Colorado
    Engineering, design, development and manufacturing company Meddux announced that it opened a new facility in Boulder, Colorado. The new, 22,000-square-foot facility doubles the overall square footage from its previous location in Colorado. According to a news release, it helps the company to quadruple its product development area and double its manufacturing footprint. Meddux’s new facility… […]
  • Reducing the Overall Cost of Validation
    By PTI Engineered Plastics Reliable medical devices and equipment are essential for researchers and doctors to accurately diagnose and treat a wide range of diseases. That is why there is such stringent oversight from the FDA to ensure these products meet the necessary requirements and specifications. To ensure compliance with regulators, manufacturers follow installation qualification… […]
  • BBS Automation has a deal to buy medtech supplier Kahle Automation
    BBS Automation said it plans to purchase high-speed automation supplier Kahle Automation to expand its medtech and life sciences business. Kahle will operate as Kahle – a BBS Company, according to a news release from Munich, Germany-based BBS and Lombardy, Italy-based Kahle. The deal is subject to regulatory approval. Terms were not disclosed. Kahle’s co-owners —… […]
  • How safe is health information after the overturning of Roe?
    The U.S. Department of Health and Human Services today issued guidance meant to better protect women’s health information as state abortion bans kick in after the U.S. Supreme Court’s overturning of Roe v. Wade. Despite the HHS actions, women may still wonder whether their health information is entirely safe going forward — a potential challenge… […]
  • Dexcom focuses on early diabetes diagnosis as COVID links emerge
    New evidence is showing that COVID-19 may increase a person’s risk of diabetes, but it could be years until we know for sure. In the meantime, Dexcom (Nasdaq:DXCM) is getting ready, VP of Global Clinical Initiatives Tomas Walker said. Walker recently spoke with Medical Design & Outsourcing to discuss the San Diego-based diabetes device developer’s… […]
  • Blackrock Neurotech and Pitt work on first at-home BCI system for remote trials
    Blackrock Neurotech and the University of Pittsburgh’s Rehab Neural Engineering Labs (Pitt RNEL) are working together on the first portable brain-computer interface (BCI) to allow patients to participate in research trials from home. A Blackrock representative said it’s the final step as the company prepares to launch its first commercial product early next year. Salt… […]
  • How medical device companies are responding to abortion bans
    Days after the U.S. Supreme Court’s decision to overturn Roe v. Wade’s protection of abortion rights, medical device companies are among those reassuring workers about healthcare access. Corporate communications to employees and the public at large come as trigger laws in nearly half of the states outlaw abortion immediately. Some medtech companies are not using… […]
  • Philips updates on testing results for recalled ventilators
    Royal Philips (NYSE:PHG) says only a small portion of returned respiratory devices displayed the sound abatement foam degradation that sparked a massive recall. Repeated ozone cleaning may have made the problem worse. Those were some of the major takeaways from an update Philips provided today on a comprehensive test and research program it implemented after its… […]
  • ResMed names Lucile Blaise as new Sleep & Respiratory Care leader
    Lucile Blaise will be the new president of ResMed’s Sleep & Respiratory Care business starting July 1, ResMed (NYSE: RMD) said today. She replaces Jim Hollingshead, who became president and CEO of Insulet (Nasdaq:PODD) on June 1. ResMed President and COO Rob Douglas is serving as interim president of the Sleep & Respiratory Care during… […]

Primary Sidebar

DeviceTalks Weekly

July 1, 2022
Boston Scientific CEO Mike Mahoney on building a corporate culture that drives high growth results
See More >

MEDTECH 100 INDEX

Medtech 100 logo
Market Summary > Current Price
The MedTech 100 is a financial index calculated using the BIG100 companies covered in Medical Design and Outsourcing.
Need Medtech news in a minute?
We Deliver!

MassDevice Enewsletters get you caught up on all the mission critical news you need in med tech. Sign up today.

MDO ad

Footer

MASSDEVICE MEDICAL NETWORK

DeviceTalks
Drug Delivery Business News
Medical Design & Outsourcing
Medical Tubing + Extrusion
Drug Discovery & Development
Pharmaceutical Processing World
MedTech 100 Index
R&D World

Device Talks Webinars, Podcasts, & Discussions

Attend our Monthly Webinars
Listen to our Weekly Podcasts
Join our Device Talks Tuesdays Discussion

MASSDEVICE

Subscribe to MassDevice E-Newsletter
Advertise with us
About
Contact us
Add us on Facebook Follow us on Twitter Connect with us on LinkedIn Follow us on YouTube

Copyright © 2022 · WTWH Media LLC and its licensors. All rights reserved.
The material on this site may not be reproduced, distributed, transmitted, cached or otherwise used, except with the prior written permission of WTWH Media.

Advertise | Privacy Policy | RSS