It is true that you can use "that" as an article (technically a determiner, if you like the jargon). For example:

• "Tim likes that car." - The article "that" points to the car in question. You don't see this sort of usage very often on the GMAT, but it's certainly not wrong.
• "Tim hopes that that car isn't a lemon." - The second "that" is an article that, as in the previous example, points to the car in question. Again, this sort of thing isn't common on the GMAT, but there isn't anything wrong with it.
• "Tim likes those cars." - We still have a "pointer" article here, but in this case we have to use "those" because "cars" is plural.

Now let's take a look at the sentence with choice (B), omitting the comma-separated portion for a moment:

Scientists say that that human skin cells were to behave in a test tube as if they were immune system cells.

As we saw in the second example above, it is possible to have a sentence that correctly uses "that that," where the second "that" is a "pointer" article. But the article has to agree in number with the thing it points to. In this case, it would have to be "those human skin cells..."

So the second "that" in (B) is wrong no matter how you slice it. (Note that even "those" would not be ideal here because without additional context, the reader has no idea what we are actually "pointing" to. Put another way, the "those" wouldn't actually accomplish anything -- it doesn't tell us which "human skin cells" we are talking about. So there's no good reason to use it.)

Another problem with (A), (B), and (C) is that "by bathing" seems to modify the "human skin cells" instead of the "scientists" -- and that doesn't make any sense. The scientists are the ones who bathed the skin cells in extracts, so we want, "... by bathing the skin cells, the scientists (or they) have made..."

I hope that helps!
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