Malvern firm to settle case over defense billing

Malvern-based Siemens Medical Solutions USA was supposed to give the U.S. Departments of Defense and Veterans Affairs the best price available for medical-imaging equipment used to examine soldiers and their families, under a contract with the Defense Logistics Agency's supply center in Philadelphia.

The government said Siemens failed to do so, and the company agreed to pay $5.9 million to settle the case without admitting wrongdoing, the U.S. Attorney's Office in Philadelphia said Wednesday.

"As we get more money into health care and more government money into health care, we are keeping our eyes open for incidents of this kind," said Assistant U.S. Attorney Eric D. Gill, who prosecuted the case along with Assistant U.S. Attorney Viveca D. Parker.

Health-care pricing is one of the most mysterious and opaque aspects of the U.S. economy, even when the American government - on behalf of taxpayers - is doing the buying.

Siemens Medical Solutions is one piece of the health-care division of Siemens U.S.A., the subsidiary of the Germany-based multinational conglomerate, Siemens AG.

Alma Gregory Sorensen, CEO of Siemens Healthcare North America, signed the agreement. A reporter's messages left for Sorensen and a Siemens spokesman were not returned Wednesday. Dechert attorney Thomas H. Lee represented Siemens and referred a reporter to the company.

This was not a whistle-blower case. The criminal investigative service of the Pentagon's Inspector General's Office learned of the overcharging and started the investigation.

The government contract, which ran from 2002 to 2008, required Siemens to give the Pentagon as low a price as it gave any commercial customer for the same item or a "like system." Prosecutors said that did not happen and Siemens Medical Solutions kept the extra money.

Subsequently, when Siemens uncovered evidence of the overcharging, it did not repay the government. Then Siemens gave "mass discounts on multiple occasions to commercial customers to address the misbilling on a prospective basis," hoping the problem would not be noticed, prosecutors said. The pattern continued when the company provided newer models.

The contract was signed with the Defense Supply Center of Philadelphia. Part of the Defense Logistics Agency, it is now referred to as DLA Troop Support. The agency provides logistical and technical services to the military, including almost all of the food, fuel and energy, uniforms, medical supplies, and construction materials.

The Philadelphia facility, which also supplies some U.S. embassies, is on Robbins Avenue in the Northeast, but its history dates to about 1800, when the Schuylkill Arsenal was built. During the Civil War, more than 10,000 people made uniforms and clothing for Union troops at the arsenal.