	Scope and Methodology

To identify which isotopes are produced, sold, or distributed either by the  Isotope Program or NNSA and how the two agencies make isotopes  available for commercial and research applications, we reviewed the DOE  Isotope Program’s information on available isotopes, isotope sales data,  and information on NNSA’s isotopes. The isotopes sold by the Isotope Program can be  categorized as (1) radioisotopes currently produced by the Isotope  Program at DOE production sites; (2) stable isotopes from the Isotope  Program’s inventory, which are no longer produced in the United States;  and (3) isotopes generated or provided by NNSA as by-products of its  nuclear weapons program (see table 3). In Providing Commercial Isotopes, DOE’s Isotope Program May Be Forgoing Revenue That Could Further Support Its Mission

To provide isotopes for commercial and research applications, the  Isotope Program takes steps to determine the demand for isotopes,  coordinate production across production sites, and set prices for isotopes,  but the program is not using thorough assessments to establish prices for  commercial isotopes. The Isotope Program has flexibility to set prices at  market levels for isotopes sold for commercial applications but instead,  for most isotopes where the program is the only domestic supplier, sets  prices at the level necessary to recover its cost to produce them. According to program officials, direct costs include labor costs and costs  for chemical processing, among others; indirect costs include facility  maintenance costs and other infrastructure costs. For research applications, isotope prices are set to recover  only direct costs. In Setting Prices for Most Commercial Isotopes, DOE’s Isotope Program May Be Forgoing Revenue That Could Further Support Its Mission

The Isotope Program generally charges full cost recovery for commercial  isotopes, but the program has not fully assessed the pricing of most of the  commercial isotopes it sells, as required by its current policy, such as  assessing the value of the isotopes to the customer or prices of similar  isotopes. To this  end, the Isotope Program established a pricing policy in 1990 that  provides latitude for establishing prices at full cost recovery or at market  prices that are higher or lower than full cost recovery, but also states that  when a market price already exists that is higher than full cost recovery,  the market price should be used. The policy also states that prices should  be assessed annually and that additional factors may be considered  when establishing prices, including the number of suppliers, demand,  competitors’ prices, and the value of the isotope to the customer. DOE’s Isotope Program Has Taken Some Actions to Identify and Manage Risks, but Its Efforts Are Not Comprehensive

The Isotope Program has begun taking some actions to identify and  mitigate risks to achieving its mission of producing isotopes, such as the  risk of relying on sales of a small number of commercial isotopes for a  large percentage of its revenues, but without first establishing clear,  consistent program objectives, the program’s risk assessment efforts are  not comprehensive. DOE’s Isotope Program Is Taking Varied Actions to Identify and Mitigate Program Risks

The Isotope Program is taking some actions to assess risks to achieving  its mission, including identifying high-priority isotopes and using its  revolving fund to mitigate risks from unforeseen events. The Isotope Program also assesses risks to the program by identifying  high-priority isotopes—those at risk of supply problems, either because  the isotopes are already in short supply or are important to users. One of the federal standards for internal control—risk assessment— states that a precondition to risk assessment is the establishment of clear,  consistent objectives. Without consolidating the multiple lists of high-priority isotopes, however,  it is unclear which isotopes have greater priority than others. Thus,  program managers may not be focusing limited resources on the most  important isotopes. Furthermore, because the program does not have clear objectives, it  cannot be assured that it is assessing and mitigating risks from all  relevant external and internal sources. The program has not, however, defined what factors it  will consider when it sets prices for isotopes sold commercially, including  defining under what circumstances it will set prices for such isotopes at or  above full cost recovery. Consolidate the lists of high-priority isotopes so the program can  ensure that its resources are focused on the most important isotopes. In its  written response, reproduced in appendix II, DOE explained that our  recommendations will generally be addressed through the Isotope  Program’s current efforts to update its pricing policy and develop a  strategic plan. Appendix I: Isotopes Available from DOE’s Isotope Program

This table identifies the isotopes provided at the time of this report for sale  by the Department of Energy’s (DOE) Isotope Development and  Production for Research and Applications program (Isotope Program).
Why GAO Did This Study

DOE is the only domestic supplier for many of the over 300 different isotopes it sells that are critical to medical, commercial, research, and national security applications. Previous shortages of some isotopes, such as helium-3, an isotope used to detect radiation at seaports and border crossings, highlight the importance of managing supplies of and demand for critical isotopes. Prior reports by GAO and others highlighted risks and challenges faced by the Isotope Program, such as assessing demand for certain isotopes. GAO was asked to determine (1) which isotopes are produced, sold, or distributed either by the Isotope Program or NNSA and how the two agencies make isotopes available for commercial and research applications; (2) what steps the Isotope Program takes to provide isotopes for commercial and research applications; and (3) the extent to which DOE is assessing and mitigating risks facing the Isotope Program. GAO reviewed DOE and NNSA documents, visited Oak Ridge National Laboratory, and interviewed cognizant agency officials.

What GAO Found

The Department of Energys (DOE) Isotope Development and Production for Research and Applications program (Isotope Program) provides over 300 different isotopes for commercial and research applications. The Isotope Program is responsible for 243 stable isotopes that are no longer produced in the United States but are sold from the programs existing inventory and for 55 radioactive isotopes, called radioisotopes, that the program is able to produce at DOE facilities. An additional 10 isotopes sold by the Isotope Program are provided by the National Nuclear Security Administration (NNSA), a separate agency within DOE, as by-products of its nuclear weapons program.
The Isotope Program may be forgoing revenue that could further its mission because of the manner in which it sets prices for commercial isotopes. The Isotope Program determines demand, coordinates production, and sets prices for commercial isotopes. To set prices for radioisotopes, the program considers the full cost of production, including direct costs (e.g., labor costs) and indirect costs (e.g., infrastructure costs). For research applications, isotope prices are set to recover direct costs to reduce prices and encourage research. For commercial applications, prices are set at full cost recoveryof both direct and indirect costsor at an isotopes market price when a market price higher than full cost recovery already exists. The program, however, has not fully assessed the pricing of most of these isotopes, as required by its 1990 pricing policy. This policy provides latitude for setting prices and states that prices should be assessed annually. Factors that may be considered when establishing prices include the value of an isotope to the customer, demand, and the number of suppliers. The program, however, has not assessed the value of isotopes to customers or defined what factors it will consider when it sets prices for commercial isotopes, including defining under what circumstances it will set prices at or above full cost recovery. As a result, the program does not know if its full-cost-recovery prices are set at appropriate levels so as not to distort the market, and it may be forgoing revenue that could further support its mission.
The Isotope Program has begun taking some actions to identify and manage risks to achieving its mission of producing isotopes, but because it has not established clear, consistent program objectives, the programs risk assessment efforts are not comprehensive. Actions the Isotope Program is taking include, among other things, identifying high-priority isotopes and using its revolving fund to mitigate risks from unforeseen events. For example, the Isotope Program has identified five lists of high-priority isotopesthose at risk of supply problems because they are already in short supply or are important to users. Isotope Program officials reported using these lists to set program priorities. The Isotope Program is taking these actions, however, without first establishing clear, consistent objectives. The federal standards for internal control state that a precondition to risk assessment is the establishment of clear objectives. Without clearly defined objectives, the program cannot be assured that it is assessing risks from all sources or that its efforts are focusing on the most significant risks to achieving its mission. Furthermore, without consolidating the multiple high-priority lists, Isotope Program managers may not be directing limited resources to the most important isotopes.

What GAO Recommends

GAO recommends, among other actions, that DOEs Isotope Program define what factors it considers when setting isotope prices, create clear objectives as a basis for risk assessment, and consolidate the lists of high-priority isotopes. DOE stated that it will address GAOs recommendations through the Isotope Programs current efforts to update its pricing policy and develop a strategic plan.