Skin cancer test results that a diagnostics company delivered to Medicare patients years ago were never withdrawn or corrected, even after questions arose internally about how reliable those tests actually were. The Justice Department alleges the company behind them, DermTech Inc., knowingly billed Medicare for tests that failed basic quality checks between January 2020 and March 2023, then let the readings stand uncorrected. DermTech, now working through Chapter 11 bankruptcy, has agreed to resolve the allegations with a $5,038,011 claim against its bankruptcy estate. The government is explicit that the resolution settles allegations only, with no determination that DermTech did anything wrong.
Two Melanoma Test Failures the Government Says Went Unfixed
According to the Justice Department, the allegations cover two separate quality failures inside DermTech’s melanoma testing process. From October 2022 through March 2023, the company is accused of billing Medicare for skin cancer tests it ran after switching to a positive control range that had not been validated for one of the test’s two key melanoma markers. Without a validated control range, the department said, there is no way to confirm the control itself is functioning properly, and therefore no way to verify whether an individual patient’s result is accurate.
A second set of allegations reaches back further, from January 2020 through February 2022. During that window, DermTech is accused of billing Medicare for tests that did not contain enough patient RNA to be tested at all, yet still produced a positive or negative melanoma reading. In both instances, the Justice Department said, DermTech reported the results to patients, and after concerns were raised about the tests, the company “neither retracted the test results nor adequately refunded Medicare.”
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A $5 Million Bankruptcy Claim, Not $5 Million in Cash
The dollar figure attached to this case is not $5 million changing hands today. The government’s own account of the settlement describes the recovery as an “Allowed Class Three General Unsecured Claim of $5,038,011” inside DermTech’s bankruptcy case, an allowed claim against the estate, not a payment the Treasury has in hand. DermTech Inc. filed for Chapter 11 bankruptcy in the District of Delaware in June 2024 and is now working through liquidation under the name DTech Liquidating Inc.
General unsecured creditors in a liquidating bankruptcy are typically paid only a fraction of what they are owed, after secured creditors and administrative costs are covered first. How much of the $5,038,011 the government actually collects from the estate will depend on what remains once DermTech’s liquidation runs its course, a detail that separates this case from a settlement where a solvent company simply writes a check.
A Former Employee’s Lawsuit Set the Case in Motion
The allegations did not originate with a government audit. They trace back to a whistleblower lawsuit filed by a former DermTech employee under the False Claims Act’s qui tam provisions, which let a private party sue on the government’s behalf and later share in any recovery. The case is docketed as U.S. ex rel. Luong v. DermTech, Inc. et al., No. 3:23-cv-01404, in the U.S. District Court for the Southern District of California.
Under the statute’s incentive structure, the relator identified in the settlement only as Ms. Luong is set to receive 20 percent of whatever the government ultimately recovers from the bankruptcy court in connection with the claim. That percentage is fixed by the settlement itself, even though the total recovery is still uncertain until the liquidation concludes.
Officials Cast the Case as Part of a Broader Fraud Push
Four federal officials weighed in on the announcement, framing the case as part of a wider effort to police Medicare billing. Assistant Attorney General Brett Shumate of the Justice Department’s Civil Division said the department is “committed to protecting Medicare patients, especially in an area as serious as skin cancer testing,” and that the government “will hold accountable health care providers who put patients at risk by billing Medicare for grossly substandard services.” U.S. Attorney Adam Gordon for the Southern District of California called the settlement “a perfect example of why the Department’s focus on fraud against the taxpayer directly leads to improved health and safety for Medicare patients.”
HHS Office of Inspector General Acting Deputy Inspector General for Investigations Miranda Bennett said patients “must be able to rely on the accuracy and integrity of diagnostic testing when making critical healthcare decisions.” FBI San Diego Special Agent in Charge Mark Remily said DermTech “allegedly administered inadequate skin cancer tests that led to the fraudulent billing of Medicare, raising serious concerns about the company’s practices.” The Justice Department noted the case fits into a broader push this year, when the administration launched the Task Force to Eliminate Fraud and the National Fraud Enforcement Division to expand efforts against fraud in federal programs including Medicare.
DermTech Inc. and DermTech LLC Are Not the Same Company
The Justice Department was explicit that the resolved claims belong only to DermTech Inc., the entity now working through liquidation, and not to any business operating under the DermTech name today. “These claims do not pertain to DermTech LLC, a company that purchased DermTech Inc.’s assets in 2024 as part of the bankruptcy proceedings,” the department said in its announcement.
For an older reader checking on the diagnostics company after seeing this case in the news, that distinction matters: the operating business that emerged from the 2024 asset sale is a separate legal entity from the one absorbing the $5,038,011 claim. The Justice Department drew that line directly in its August 26, 2026 release, number 26-974, rather than leaving the separation to inference.
This article was produced with the assistance of AI and reviewed by The Financial Wire editorial team.
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Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
