Ninth Circuit tosses case alleging Planned Parenthood defrauded taxpayers for $200M

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By Kirsten Andersen

The Ninth Circuit Court of Appeals has upheld a lower court’s dismissal of a lawsuit by a former Planned Parenthood executive who blew the whistle on an alleged $200 million the company overcharged federal and state health programs for birth control. The court said the lawsuit was filed too late to move forward.

P. Victor Gonzalez, former chief financial officer for Planned Parenthood of Los Angeles, first filed the lawsuit in 2005, after he was fired. He alleges his termination came because he raised concerns about the company’s practice of deliberately marking up the cost of drugs they purchased under the federal drug-pricing discount program PHS 340B. In submitting for reimbursement, the company would sometimes mark up prices by as much as 12 times the acquisition cost.

Gonzalez claimed the markup scheme went on for more than 13 years and cost taxpayers more than $200 million in overcharges, which went straight into Planned Parenthood’s coffers.

The Ninth Circuit said that because there is a three-year statute of limitations on this type of fraud case and Gonzalez provided evidence going back to 1997 when he brought the suit in 2005, the former employee had “fatally undercut” his own case.

The older documents in question were a series of communications between state health officials and Planned Parenthood in which the state expressed concern that they were being overcharged for birth control pills, which were supposed to be billed “at cost.”  Planned Parenthood responded that they were only charging their “usual and customary” rate for the drugs – despite the fact that they had obtained them at a deep discount – and pointed out that there was no explicit definition of “at cost” in the documents governing the reimbursement programs.

The state did not follow up on their original complaint until 2004, when they audited the company and found Planned Parenthood’s failure to comply with the billing rules resulted in $5,213,645.92 in overcharges during the audit period alone.  But the state sent a letter to Planned Parenthood the same day the audit was released stating that because “no specific definition of ‘at cost’ is contained in [the billing manual]” and there was some concern that “conflicting, unclear, or ambiguous misrepresentations have been made to providers,” the state would not be pursuing reimbursement from Planned Parenthood.

Based on the state’s refusal to pursue recompense for its losses, the Ninth Circuit said it was possible that the overcharges were an honest mistake on the part of Planned Parenthood, and that Gonzalez could not prove that the company had malicious intent.

“Gonzalez’s allegation that Planned Parenthood knowingly submitted false claims is only merely possible rather than plausible,” the court ruled.  “Stated simply, even if bills sent by Planned Parenthood were false in portraying its costs, one cannot plausibly conclude that there was knowing falsity on the part of Planned Parenthood given the explicit statements addressing this subject made by the State of California … and the state’s silence after being told what procedures Planned Parenthood was following.”

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