Mahdi Khelfaoui, former nuclear safety analyst for AECL

Private profits vs public policy: How Canada lost its leading medical isotopes position

By Mahdi Khelfaoui

In March 2018, the Chalk River nuclear laboratories in Ontario will produce their last medical radioisotopes, the federal government having decided in February 2015 to permanently shut down the NRU research reactor. The NRU long held a strategic position in the radioisotopes industry, being responsible for more than 40% of the molybdenum-99m (Mo-99) world production and one third of all radioisotopes used in nuclear medicine. Through its daughter isotope, technetium-99m (Tc-99m), Mo-99 is involved in 80% of nuclear medicine diagnoses, corresponding yearly to 35 million medical procedures worldwide.

In May 2014, the federal government also lifted the amendment prohibiting foreign interests from owning more than 25% of shares in MDS Nordion, the company in charge of marketing and selling Canadian radioisotopes. This legislative change paved the way to its acquisition by the US-based company Sterigenics.

These two decisions signaled the beginning of the end of Canada's central position in the medical isotopes business, which it occupied since the 1950's, supported by decades of public funding. This withdrawal is directly linked to the cancellation by Atomic Energy of Canada Limited (AECL) of the two MAPLE reactors project in March 2008. After spending jointly with MDS Nordion $680 million on the commissioning of these two substitutes to the aging NRU, AECL cited technical hurdles and cost overruns to justify the cancellation of the project. However, the root causes of Canada's exit from the world radioisotopes market are to be found in public policy rather than simply in engineering and financial issues.

In 1991, the Mulroney government privatized the Radiochemical Company (RCC), AECL's radioisotopes division, to the benefit of MDS Health. The RCC was renamed MDS Nordion by its new owner. By amputating AECL from one of its most profitable branches, the government proceeded in a typical operation of socializing losses and privatizing profits. The costs associated with the operation and maintenance of the NRU and the management of radioactive waste generated from the radioisotopes production remained AECL's burden. But these costs could not be compensated by the revenues gained from the 25-year commercial agreement that bound AECL to its new exclusive customer. One year after its privatization, Nordion had already generated $160 million in revenues, only $5 million less than its purchase price from the government.

Over the next two decades, the federal government let the economic interests of a private actor dictate the terms of AECL's strategy on the radioisotopes market. This was detrimental to important public policy issues such as nuclear proliferation, public health and technology policy. The inclusion of these issues, far from undermining its business, would rather have allowed Canada to maintain its leading position.

It is hardly ever mentioned that the continuation of the MAPLE project would have necessitated the conversion of the reactors targets from highly enriched uranium (HEU) to low-enriched uranium (LEU). This design change would have added additional costs and risk to a project that already had its share of uncertainty. Since 1999, as part of its nuclear non-proliferation policy, the US government made its HEU exports to Canada conditional to a commitment from AECL and Nordion to convert the MAPLE targets to LEU. As early as 1990, AECL had promised to convert its HEU targets in anticipation of the commissioning of the MAPLE-X reactor, but the project was halted in 1993 for lack of funding.

Three years later, when the MAPLE project was reactivated in haste, Nordion's economic interests had priority: using LEU would have slowed down the project, was more expensive and thus less profitable in the short term. Rather, Nordion chose to find means of extending the conversion deadline by lobbying US congressional reps and setting up a feasibility study that convinced the US government to continue allowing HEU exports to Canada.

Had they remained public, Mo-99 profits could have been invested in the development of Tc-99m, non-reactor based production techniques, especially using cyclotrons. The government finally decided to do so in 2013 after an extended NRU outage revealed the fragility of the Mo-99 world supply chain and caused a stir in the medical community. Of lesser production capacity than nuclear reactors, cyclotrons would still have filled the Canadian demand, given that NRU's bulk production is intended mainly for export.

With the TRIUMF laboratory cyclotron, which has produced medical isotopes since 1982, Canada had a unique tool to undertake such an R&D program. Based in Vancouver, TRIUMF announced in January 2015 that it had succeeded in developing a method for producing enough Tc-99m to supply the population of British Columbia. This is important insofar as the radioactive waste-free production techniques of Tc-99m will gain increasing importance in the future.

The most fundamental mistake made by the government with the privatization of the RCC was its failure to understand that the isotopes business owed its profitability to its organic link with the rest of Canada's nuclear program. The Mo-99 selling prices never incorporated the costs of the NRU's operation, maintenance and long-term management of radioactive waste, since these were included in the R&D expenses on the CANDU program.

In the same vein, the absurdity of the MAPLE project lay in the fact that its two reactors were being exclusively devoted to the production of medical radioisotopes. By basing the Mo-99 prices on those of the pre-privatized era, by leaving the bulk of the sale profits to Nordion and by accepting to assume most of the NRU's and MAPLE's operational costs, AECL was involved in a partnership economically doomed to failure.

This sad story shows paradoxically that, by focusing on medium- and long-term strategic issues and not on short-term revenues, the government could have maintained AECL's leading position in the world radioisotope market.

Mahdi Khelfaoui is completing a PhD thesis in Science, Technology and Society on the transformation of the Canadian radioisotopes industry. He worked formerly as a nuclear safety analyst for AECL.