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Market Impacts of Converting to Low-enriched Uranium Targets for Medical Isotope Production

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Market Impacts of Converting to Low-enriched Uranium Targets for Medical Isotope Production ( market-impacts-converting-low-enriched-uranium-targets-medic )

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Chapter 3. Cost impacts of LEU-target conversion 3.1. Framework and methodology of economic modelling As with the capacity model, the economic model is intended to provide a reasonable description of the costs of producing and supplying 99Mo/99mTc through the entire supply chain and the impacts of converting to LEU targets on those costs. The model started by creating a reference case for each currently operating 99Mo irradiation and processing facility, as well as two new entrants: the FRM-II and the RIAR project. Given that the point of the modelling was to determine the impact on costs from LEU-target conversion, other new entrants were not modelled as they are planned to be non-HEU 99Mo production facilities and thus do not face “conversion” costs. In addition, it was deemed very difficult to delineate “new infrastructure” costs from “LEU-related” costs for new entrants. The economic model is a facility- and time-specific model, allowing for each facility to have different cost impacts and different times, according to their own situation, timing and infrastructure needs. The facility-specific reference cases were developed with data provided by supply chain participants for the NEA economic study (OECD/NEA, 2010) and updated where necessary during this study. Where direct information was not provided, the NEA made assumptions about costs based on the results of the economic study. Using these data, the reference cases were developed using the levelised unit cost of 99Mo (LUCM) methodology used in the economic study.1 Figure 3.1 provides an overview of the framework of the economic model. The reference case for each facility provides the baseline from which the cost impacts of converting to LEU targets are measured. The reference case is based on a situation where no LEU-target conversion occurs. Facility- and time-specific expected impacts of LEU- target conversion were applied to the reference case to assess the cost impacts on the full supply chain, with the facility cost impacts flowing down through the supply chain, eventually changing the cost to the end payer (i.e. health insurer or patient). Impacts at each stage of the supply chain were modelled and passed through to the next stage of the supply chain. In order to determine the expected cost impacts, the expert working group followed a very similar procedure as was undertaken for the capacity modelling. They first analysed all the potential places in the supply chain where there could be an impact on cost (either on capital or operations) from LEU-target conversion – called “cost impact elements”. From the list of all potential impact elements, the group again determined which were important, important but not likely, or not relevant. Annex 3 provides the full collection of the first two categories of the cost impact elements. Again, the NEA modelling does not account for those cost impact elements that were deemed to be not relevant or important but not likely. Some of the latter elements will be discussed in this document but were not modelled as it was not expected that the cost impacts would occur. However, it is important to be aware of the risks related to these cost elements. 1. For a detailed discussion of the LUCM methodology, refer to Annex 2 of OECD/NEA, 2010. MARKET IMPACTS OF CONVERTING TO LOW-ENRICHED URANIUM TARGETS FOR MEDICAL ISOTOPE PRODUCTION, ISBN 978-92-64-99197-2, © OECD 2012 37 CHAPTER 3. COST IMPACTS OF LEU-TARGET CONVERSION

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