MD+DI News Editor Amanda Pedersen loves a good poop joke as much as anyone, but medtech companies that commit fraud are no laughing matter.
During this week's Medtech Unfiltered video, Pedersen sounds off about companies like Theranos and uBiome. In case you missed it, the Securities and Exchange Commission recently filed litigation against the co-founders of San Francisco, CA-based uBiome, a now-defunct stool-testing company. They are accused of fraudulently raising millions of dollars and duping doctors into ordering unnecessary tests. Read the full story here.
Good morning everybody, and welcome to Medtech Unfiltered. I’m Amanda Pedersen, I'm the news editor at MD+DI, and today I want to talk to you about the uBiome story that MD+DI published earlier this week. It was a story that was covered widely in mass media and that is primarily because it made for a good poop joke. Don't get me wrong, the people that know me the best know that I love a good poop joke. In fact, I kind of live for them. But in this case, I think it needs to be pointed out that this story has implications for the industry that go far beyond just making a good poop joke in a headline – and I saw some good ones. I think my favorite was, ‘Turns Out That Stool-Testing Company was Full of It.’ Not gonna lie, I kinda wish I’d thought of it myself.
But as I said, this story – for those of you who are not familiar with it – is a story that really sounds familiar to the industry. You know, it's hard not to think of Theranos when you hear the story. So, uBiome was a San Francisco-based company, and recently … late last week, the two co-founders, who are actually now married as it happens, they were indicted on formal charges [brought by] the Securities Exchange Commission claiming that they misled health insurance providers, their investors, and doctors and patients. So [these are] pretty serious allegations. Apparently, it all started back in 2018 when they were raising money for their [series] C round, and during that series C round of financing they raised $60 million, valuing the company, at the time, at $600 million – that's not chump change. And it was all based on misleading investors into believing that their technology was much better than it actually was.
They were a stool-testing company, and they allegedly violated all kinds of ethical and scientific rules, so to speak, Including using old stool samples that customers had provided to do testing. And they were warned by their employees, including the director of their laboratory … that this could be a problem, this could get them into legal problems, as it in fact has. So they were – according to the SEC complaint that was filed – aware of the fact that their technology was not what it was cracked up to be. And just like in the case of Theranos they continued to go by the philosophy ‘Fake it ‘till you make it,’ and that's just not acceptable anymore, if it ever was, which in this industry, when you're dealing with people's lives and health, [it shouldn’t have been].
If it sounds like I'm taking personal offense to this particular case, it's because I am. About 22 years ago, I was diagnosed with an inflammatory bowel disease, and that is one of the conditions that they were testing patients for. So they would convince doctors to do these tests on patients’ stool samples to determine if they had IBD and what kind of IBD they had, and they also later expanded into women's health and sexually transmitted diseases. But anyway, my point is that, yeah, we all got a good laugh at the headlines, and we kind of made some jokes of our own in the story that we published, but it's not a joke at all.
Industry really needs to stand up to companies that are doing this, particularly in the diagnostic community, given the situation that we've been in for the past year with COVID-19. The diagnostic industry is more important than ever. That's not to say that it wasn't important before, it's always been very important, but the public eye is on the diagnostic space more than they ever have before. …
When we hear about these stories it just makes it that much harder – when it's already so incredibly hard – for a medtech company or a diagnostic company to raise money. They have so many barriers to adoption. They need [to raise] the funds to fund it, they need to go through the regulatory hurdles and convince FDA that it is both safe and effective, and they have to convince health insurance companies that … it’s a technology that is worthy of reimbursement, and then they have to convince doctors to prescribe these tests, and patients in turn to use them and trust them. You want to talk about trust issues, hearing stories like this is why so many patients have trust issues. They don't know if they should trust their doctor because maybe their doctor is getting kickbacks to prescribe such tests, or maybe their doctor is just regurgitating everything that the salesperson told them and [hasn’t] actually looked into it, and you know there's just so many levels where trust becomes a problem when you're dealing with people's health.
So these are really serious allegations. You know I've always said that the best thing about everything that happened with Theranos is that it served as a warning and a cautionary tale for the rest of the industry. The rest of the industry can take note of what Theranos [allegedly] did and didn't do, and the mistakes that they allegedly made, and take precautions themselves and put policies and procedures in place at their own companies to ensure that this never happens to them. Nobody wants to end up being Theranos, or in this case, the next uBiome. uBiome was not as well known, of course, as Theranos, but they did have quite a bit of support and there was quite a bit of enthusiasm around their technology.
So I apologize if I'm on my soapbox … but it's because I really care about this industry, and I really care about patients, and I just don't want to see this happen again. I don't want to see good companies have to climb that much higher and work that much harder to overcome these barriers to adoption because of the failures and mistakes and flat out lies told by other companies in this space. It just really gives the industry as a whole bad reputation. Theranos did no favors whatsoever for the industry in terms of reputation, and if the allegations against uBiome prove to be true and their found guilty of these charges, then that's just going to be another hit to the industry. … We all remember The Bleeding Edge documentary that [debuted on] Netflix a few years ago, and was kind of a wake-up call for the industry that patients are paying attention, and patients are well educated, and they are not just blindly following their doctor's advice as they might have done in the past. They have access to information, and they are seeking that out, they are educating themselves and increasingly taking charge of their own care.
So it's just it's a hot button topic for me for a lot of reasons, and it would be even if the disease that [uBiome] was trying to test for wasn't something that impacted me personally. But in this case, it actually does [impact me personally], so I'm just going to be on my soapbox about it all I want, and I apologize for that.
So back in 2016 when Theranos was big in the news, [MD+DI] published a story where we had spoken to a regulatory consultant by the name of David Amor, and he provided several really good tips for the industry on how to avoid finding yourself in a situation like Theranos. I really encourage [any company] making a diagnostic test or medical device or even a pharmaceutical for that matter, to really take heed of these tips, and take this seriously if you're not already. A couple things that he mentioned … be strict about documentation and control, but be stricter about intended use.
And I can't help but just add a couple of my advice. I'm not a scientist. I'm not a doctor, I'm not an engineer … but it's really just basic [common sense]. You don’t have to be a scientist or engineer to know that you really shouldn't lie to your investors – or any of your stakeholders. Listen to the experts that you do hire. If your scientists and engineers come to you and say, ‘look, the way that we're doing things is not right, and this could raise some red flags, and this could get the FBI raiding us or whatnot. … It just comes down to honesty and not being greedy. I mean, both of these co-founders … the company itself made millions of dollars off of these misrepresentations of their technology, but [the co-founders] themselves each made millions of dollars off of that series C round in 2018 … I just think it's a really important topic.
I really encourage you, if you have not already read the story … I really encourage you to read the story MD+DI published. …These are really important things to take note of, so we will of course be following the story and bring you updates as they happen.
Another thing that they've David Amor talked about was usability studies, and that's something that is very important, probably more so than ever before in today's environment, and we're going to be talking more about that next week, so I really hope you can join us. Once again, I'm Amanda Pedersen and this has been Medtech Unfiltered.