DermTech, the California lab behind an adhesive-patch skin test marketed as a needle-free alternative to a mole biopsy, has reached a deal with the Justice Department over how it billed Medicare for that test. The company, now unwinding in Chapter 11 bankruptcy as DTech Liquidating Inc., is turning over an allowed unsecured bankruptcy claim of just over $5 million as part of the resolution. For Medicare enrollees who’ve had a mole or freckle checked with this kind of test, the case is a reminder that a lab report getting paid by Medicare and a lab report holding up under scrutiny are two different things.
Two Batches of Tests the Government Says Should Never Have Been Billed
The government’s allegations center on two separate stretches of testing at DermTech. From January 2020 to February 2022, the company is accused of billing Medicare for skin-cancer tests that didn’t collect enough patient genetic material, known as RNA, to actually be analyzed, yet the lab generated a positive or negative result anyway and sent it on to the patient and their doctor. From October 2022 to March 2023, DermTech allegedly billed Medicare after switching to a positive control range for one of the test’s two key melanoma markers that had never been validated, meaning there was no reliable way to confirm the control itself was even functioning correctly during that stretch.
According to the Justice Department’s account of the case, DermTech reported results to patients in both situations, and when concerns were raised internally about the reliability of the testing, the company neither retracted the affected results nor adequately refunded Medicare for the claims tied to them. The government’s filing does not specify how many patients received a result from one of the two flagged batches.
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The Whistleblower Who Brought the Case Forward
The settlement resolves a qui tam lawsuit, captioned U.S. ex rel. Luong v. DermTech, Inc., filed under the whistleblower provisions of the False Claims Act by a former DermTech employee. Those provisions let a private individual sue on the government’s behalf and collect a share of whatever the government eventually recovers. Here, the former employee, identified in court filings as Ms. Luong, is set to receive 20% of what the government collects from the bankruptcy court in connection with the settlement. The case was handled jointly by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Southern District of California, the FBI’s San Diego field office, and the HHS Office of Inspector General, which investigates fraud against Medicare and Medicaid.
Cases like this one aren’t unusual. The Justice Department’s Civil Division reported more than $6.8 billion in False Claims Act settlements and judgments in fiscal year 2025 alone, and health care billing accounts for the largest share of that total most years, according to the department’s own tally.
Why “Settled” Isn’t the Same as “Guilty” Here
It’s worth being precise about what this settlement does and doesn’t establish. It resolves a civil case, not a criminal conviction, and DermTech never went to trial. The Justice Department’s own release states plainly that “the claims resolved by the settlement are allegations only and there has been no determination of liability.” Agreeing to a resolution rather than litigating a False Claims Act case is common, particularly for a company that is already working through bankruptcy and has limited ability to fight a prolonged legal battle. There’s also a corporate distinction worth keeping straight: the claims resolved here belong specifically to DermTech Inc., the original company that filed for Chapter 11 protection in Delaware in June 2024. They do not touch DermTech LLC, the separate company that purchased DermTech Inc.’s assets during that bankruptcy process in 2024 and has continued operating a skin-testing business under the DermTech name since.
What Happens to DermTech’s Testing Business Now
DermTech Inc. itself is being wound down, not restarted; DTech Liquidating Inc. exists to work through the bankruptcy estate’s remaining assets and pay its creditors, and the roughly $5.04 million owed to the government is one line in that process, ranked as a general unsecured claim rather than a priority debt. That means Medicare’s fund is paid alongside DermTech’s other unsecured creditors, not ahead of them, and may not collect the full amount depending on what’s left in the estate once everyone is paid out. The separate DermTech LLC, which bought the testing technology and brand out of bankruptcy in 2024, was not a defendant in this case and isn’t required to pay any part of the settlement.
What This Means If You’ve Had This Test Done
Medicare beneficiaries who had a DermTech test during either flagged window shouldn’t expect a direct notice tied to this settlement; it resolves a claim between the company and the government, not individual patient cases, and neither the Justice Department nor HHS-OIG has announced a patient notification effort. Anyone who was told a mole or spot was “clear” based on one of these tests, particularly between January 2020 and March 2023, has reason to ask their dermatologist whether the original visual exam or a biopsy recommendation still stands on its own, separate from the lab result. A settlement like this one closes the government’s case against DermTech Inc.; it doesn’t retest anyone’s skin, and the record the Justice Department published is, for now, the most complete public account of what went wrong.
This article was produced with AI assistance and reviewed by a human editor. Figures are linked to their primary sources; where a claim could not be verified from the public record, we say so.
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