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 American Life League

Editor's Note: This article originally conflated Gonzalez's separate claims under the federal False Claims Act and the California False Claims Act and missed key details about each. We regret the error.

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.

P. Victor Gonzalez, former chief financial officer for Planned Parenthood of Los Angeles, filed claims under both the federal False Claims Act (FCA) and the California False Claims Act (CFCA), 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 from 1992 to 2004 and cost taxpayers more than $200 million in overcharges, which went straight into Planned Parenthood’s coffers. But because California has a three-year statute of limitations on this type of fraud case and Gonzalez provided evidence going back to 1992, the California courts rejected the case, saying he waited too long to file it – a decision the 9th Circuit upheld.

The 9th Circuit claimed Gonzalez “fatally undercut” his own case by providing documentation of correspondence 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.

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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.”

Gonzalez’s attorney, Walter Weber of the American Center for Law and Justice, disagreed with the court’s stance.

“[Planned Parenthood] had a duty to know the relevant law (forbidding mark-ups); state officials repeatedly told PP it could not mark up its charges; and PP’s insinuation that the state somehow secretly approved of the overbilling is belied not just by numerous contrary official state instructions, but by the glaring fact that the state audited PP for this overbilling and found that PP had not complied with the law,” Weber wrote in a brief filed with the 9th Circuit ahead of its ruling.

“That the state ultimately chose not to collect the overcharge was a matter of discretionary debt collection; that cannot retroactively sanitize PP’s years-long violation of the law.”