Guidance Document - Provision of Outage Reserve Capacity for Molybdenum-99 Irradiation Services: Methodology and Economic Analysis

In June 2011, the OECD Nuclear Energy Agency's (NEA) High-level Group on the Security of Supply of Medical Radioisotopes (HLG-MR) released its policy approach for ensuring a long-term secure supply of molybdenum-99 (99Mo) and its decay product technetium-99m ('99mTc). This policy approach was developed after two years of extensive examination and analysis of the challenges facing the supply chain, and the provision of a reliable, secure supply of these important medical isotopes. The full policy approach can be found in the OECD/NEA report, The Supply of Medical Radioisotopes: The Path to Reliability (NEA, 2011). One of the key principles in the policy approach relates to the provision of outage reserve capacity (ORC) in the 99Mo/'99mTc supply chain, as defined on page 7: 'Principle 2: Reserve capacity should be sourced and paid for by the supply chain. A common approach should be used to determine the amount of reserve capacity required'. This Principle follows the findings of the OECD/NEA report, The Supply of Medical Radioisotopes: An Economic Study of the Molybdenum-99 Supply Chain (NEA, 2010), which clearly demonstrated the need for excess 99Mo production capacity, relative to demand, as some reactors may have to be shutdown unexpectedly or for extended periods. The Study also demonstrated that the pricing structure from reactors for 99Mo irradiation services prior to the 2009-10 supply shortage was not economically sustainable, including the pricing of ORC, with the cost being subsidised by host nations. These nations have indicated a move away from subsidising production, which often benefits foreign nations or foreign companies, and therefore pricing for irradiation services must recover the full cost of production to ensure economic sustainability and a long-term secure supply. Appropriate pricing would also encourage more efficient use of the product, reducing inefficient use of 99Mo/'99mTc would reduce excess production and the associated radioactive waste. Since the 2009-10 supply shortage, there has been a co-ordinated effort by 99Mo/'99mTc supply chain participants to improve communication and share information in a more timely and effective manner. This helps optimise operating reactor capacities and minimise the impact of potential future supply shortages. However, in addition to paying for operating capacity through a full-cost recovery methodology, the supply chain should also be responsible for maintaining adequate ORC and paying for it. All 99Mo producers that supply the global market should maintain and pay for ORC, otherwise there will be market distortions that could jeopardise the long-term economic sustainability of the irradiation providers and thus jeopardise the long-term supply security of 99Mo/'99mTc. In addition, it should be recognised by all consumers within the global market that the price increases expected by the application of full-cost recovery should flow through the supply chain and should be reflected in the costs of the final medical procedure, to be reimbursed appropriately by the health care system. This guidance document provides a methodology for determining the necessary amount of ORC to be provided, an approach to valuing and paying for ORC, and the economic effects from ORC pricing. The provision of ORC is important to achieve long-term economic sustainability of the 99Mo/'99mTc supply chain and improve the global supply reliability of these key medical isotopes. To ensure that a sufficient level of ORC is maintained at all times, ORC should be appropriately priced and included in contracts between supply chain participants. This would compensate reactors for the capital and operational costs that they incur to hold it. Otherwise, reactors would have an incentive to use any reserve capacity for other missions. Paying for ORC would increase 99Mo prices throughout the supply chain, with the largest increases occurring upstream - at the reactor and processor levels. At the end-user level (radio-pharmacies and hospitals), isotope prices are projected to increase only slightly, with the ORC irradiation value remaining below 1% of the final reimbursement rate. The economic effects from valuing and paying for ORC presented in this document show that the relative 99Mo price increases are not appreciably different in a case with new, multipurpose reactors (including their capital costs) and many existing reactors (excluding their capital costs). However, in absolute terms, the case with capital costs shows that maintaining ORC results in significantly higher costs for the supply chain than the case without capital costs