UPDATE 1-MDS struggles to avoid medical isotope shortage

* MDS looking for alternative isotope supplies

* Shortage threat remains as alternatives few

* Government to look at long-term solution (Adds government action; in U.S. dollars unless noted)

VANCOUVER, British Columbia, May 28 (Reuters) - Medical isotopes will stay in short supply despite efforts by distributor MDS Inc (MDS.TO) to replace supplies lost due to the shutdown of a key Canadian reactor, a company spokeswoman said on Thursday.

The Chalk River nuclear reactor, which produces about a third of the global medical isotope supply, was idled in mid-May by a leak of heavy water, used in the reaction process. The plant's operator, government-owned Atomic Energy of Canada Ltd, warned on Wednesday that it will be at least three months until the leak is fixed.

MDS's Nordion division has an exclusive agreement with AECL to distribute the isotopes, which are tiny quantities of radioactive material used for medical testing and in the treatment of heart disease and cancer.

"We've reached out to our supply network, and they've been responsive. But, I'll be honest with you, there is a limited supply," said Tamra Benjamin, a spokeswoman for MDS Nordion.

The shutdown has sent hospitals, especially in North America, scrambling for alternative sources of the isotopes, which have a limited shelf life and cannot be inventoried.

There are few reactors around the world that produce the isotopes, and medical experts have warned they do not have enough excess capacity to replace isotopes from Chalk River, which produces about half of North American supply.