Phillip Frost Talks About Climate Change, The Science Museum And Doing Business In Sunshine Economy
Dr. Phillip Frost thinks it has become "heresy" to question the role of human factors in the changing climate.
"I don't question that [the climate] is changing. But what I also know for an absolute fact is that over centuries it has been changing all the time," said Frost during a wide-ranging interview with The Sunshine Economy in which he discussed business, his philanthropy and the science museum that now bears his and his wife's names.
Frost is the largest private benefactor of the new Phillip and Patricia Frost Museum of Science, which opened in May. The Frosts gave $45 million to the museum.
Science has made Frost a billionaire three times over, running three different pharmaceutical companies.
He has given millions of dollars to further scientific education through funding scholarships for Florida students to study science, technology, engineering and math at Oxford, and $100 million to create the University of Miami’s Frost Institutes for Science and Engineering.
PROMOTING 'SERIOUS DISCUSSION' ABOUT SCIENCE
He said he did not play much of a role in the current exhibits at the museum, but "I think going forward we hope to play a bigger role in the selection of exhibits." For example, Frost said he's talking with the Smithsonian and it's astrophysics observatory about the possibility of a traveling display exploring the search for extraterrestrial life.
"There's an amazing amount being done by the sophisticated world of science in that direction, more than most people are aware of. That's the objective, to make them aware of the tremendous interest and excitement that surrounds this area," he said.
Frost also would like to see the museum play a role in a "serious discussion" about what climate change is about. "It's become almost a religious issue rather than a scientific issue. I'd like to bring it back more to a scientific level for a serious discussion rather than a political debate."
To make his point, Frost mentioned that carbon dioxide is the fourth most prevalent gas in the atmosphere. It makes up .04 percent. "People don't realize it's there in such small quantities. They picture it's growing and growing massively," he said. "There's a lot of misconception."
According to NASA's Global Climate Change carbon dioxide levels in the air are at the highest level in 650,000 years.
Frost is not a climate change denier. He's a skeptic about the role of humans in a changing climate. "The climate has been changing at a time when there were no humans and ever since."
BUILDING BILLION DOLLAR BUSINESSES
Dr. Frost has been called the Warren Buffett of biotech. Both Buffett and Frost have built their fortunes by buying and building companies, but there are two significant differences between them.
The first one is that Buffett tends to behave more like a financial manager than a CEO. Frost, on the other hand, buys companies to run himself. In fact, Frost has done it 11 times since creating OPKO in 2007 by way of a three-way merger.
OPKO has bought drug development companies and medical diagnostic firms. It also has 10 strategic investments in a variety of smaller companies involved in a host of drug and medical device research.
And that’s the second difference -- Frost’s concentration. While Warren Buffett’s Berkshire Hathaway owns Dairy Queen, Geico Insurance and Benjamin Moore paints among dozens of others in varied industries, Frost tends to focus his business investments in the health industry.
It is a concentration that has served him well, putting him on the Forbes list of richest Americans -- No. 134.
Frost got there through two previous drug companies and by changing the pharmaceutical industry along the way. His first, Key Pharmaceuticals, was a Miami company he took over in 1972. He took the company’s medicines and figured out new delivery methods such as a time-release capsule. Ten years after taking over Key, the company was selling $100 million worth of medicine per year. In 1986, Frost sold Key for more than $800 million.
His next company would be even bigger. Ivax was created by merging three firms as Frost began looking for new drug discoveries. Ivax grew quickly by selling generic medicines and then developing its own drugs. Frost sold Ivax in 2005 to an Israeli competitor for more than $7 billion.
Frost didn’t retire. He turned his attention to OPKO Health, the company he has run for the past decade from the same building he ran Ivax. Here's an exceprt from our conversation:
WLRN: Describe OPKO.
Frost: It's a hybrid of a different sort. It's a combination of the diagnostics side of the industry with therapeutics. On the therapeutic side, our interest is in developing important drugs that can be used by lots of people. On the diagnostic side, we have a large reference laboratory with over $1 billion in sales. It's headquartered in New Jersey although we have a laboratory right here in Hialeah.
Why not focus on that testing portion that is generating so much revenue?
The business that you're referring to is, when all is said and done, a commodity type of business with growth coming more slowly. With a new drug the growth is explosive or potentially explosive. On the other hand, a new diagnostic test, the 4Kscore test for prostate cancer has the potential to generate more profit with a single test than all of BioReference, our diagnostic company with $1 billion of sales put together.
According to your first quarter earnings conference call, you spoke about the reimbursement from a Medicare payments contractor for the test at $595 this year and $750 in 2018. Using that as an example for health-care price inflation, how do you let the health-care consumer into the thinking behind that pricing?
It is very difficult because the value of any type of therapy has to be measured in many different ways. It is a matter of daily concern and discussion. I don't pretend to have the answers.
How do you think about the role for-profit health care plays in this discussion?
There are many factors that go into the costs. Pharmaceutical and drug costs are a small part of it -- roughly 10 percent of the overall cost of health care. So although a lot of attention is focused on the drug industry, people are probably looking in the wrong place if they're interested in saving a lot of money.
Where should regulators and legislators be looking?
They really need to be looking at hospital costs, which represent the major [cost] area. We're living through a time when you have more sophisticated equipment that's being utilized. That costs more. Salaries in the industry are higher than when I was young. When I was an intern, my salary was $1,100 a year and I had to pay for my food and uniforms out of that. When I was a first-year resident of the University of Pennsylvania, I went up to $2,500 a year and I had to pay for my food, uniforms and my living quarters. So you can see that things have changed dramatically.
How would you describe the Miami business environment you encountered when you came here?
Miami was a small town back in 1965 and there was very little in the way of technology in a business sense of any sort. The main industry here was tourism for sure, then as an offshoot of that, real estate business and construction business.
Some would say not much has changed.
There has been a little bit more development in the technology area, and that's one of the things I try to change with our investments and what you're calling philanthropies. I look at them as investments in the future of the area. All of that is my way of trying to have the technical side of Miami develop more rapidly and more deeply.