Delusional parasitosis is the false belief that one has parasitic organisms present on or under the skin. It's sometimes called "Ekbom syndrome" (or "Eckbom Syndrome") after the German psychologist who first described it in 1938 as being different from just a phobia of insects or other organisms, and when it appears as a symptom of some larger mental illness (or as part of drug or alcohol withdrawal), it's sometimes called "formication." However, "formication" means that the patient actually hallucinates the feeling of bugs on them or under their skin. Delusional parasitosis is a larger condition which includes cases where the patient doesn't feel their infestation; they are just convinced that they have parasites.

People with this problem often go to a dermatologist or a pest control center, even bringing in skin scrapings to try and prove that they are infested with something real. (Psychologists consider this "matchbox sign" of bringing a container of samples to be "especially ominous," indicating a severe problem.) Patients may spend hours daily trying to clean, sterilize, or fumigate their surroundings, and the skin sensations can be so unsettling as to bring the patient to try and dig the "bugs" out with tweezers or knives. And in about 12% of patients, someone else around them shares the delusion with them. (There are also support groups such as the National Unidentfied Skin Parasites Association, www.skinparasites.org, who unintentionally provide a reinforcement for the beliefs of delusional people.)

Treating this is very difficult because the sufferers will usually not accept being sent to a mental health professional; they feel that they have a physical problem. However, as Philip Weinstein notes in Insects in Psychiatry, "Remember that psychiatric patients can be the unwilling hosts of lice, mites, and bedbugs as easily as can anyone else" -- sometimes there really are parasites. After ruling out real infestations, allergies, and side effects of other physical problems, it is not uncommon for a dermatologist or parasitologist to keep treating the patient to keep them from just disappearing after a psychologist is suggested as a possibility "to help the patient live with the problem more comfortably." The drug pimozide, also given to sufferers of schizophrenia and Tourette's Syndrome, often helps reduce the delusions.

Sources:
Lappé, Marc. The Body's Edge: Our Cultural Obsession with Skin. New York: Henry Holt and Company, 1996.
http://www.insects.org/ced2/insects_psych.html
http://delusion.ucdavis.edu/
http://exn.ca/Stories/1998/05/01/61.asp
http://www.aafp.org/afp/991201ap/letters.html
http://www.straightdope.com/columns/000623.html
http://www.mmhc.com/nhm/articles/NHM9904/Takahashi.html

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