Monday, August 17, 2015

Berkeley soda tax raised price less than 1-for-1

Cawley and Frisvold compare soda prices in Berkeley and San Francisco before and after the new soda tax took effect in Berkeley. They find that Berkeley prices rose by less than half of the new tax, and they discuss a variety of reasons why that may have happened. Particularly interesting was the concomitant response of (same-brand?) diet soda prices, which could have been a response to shifted demand but is worrisome for a policy that tries to make calories more expensive.

Friday, August 14, 2015

UPPs & downers in contact lens prices

In March, the Times reported on the new Unilateral Pricing Policies (UPPs) of contact lens manufacturers, who have set retail price floors vendors that are substantially higher than what 1-800 Contacts, Costco, and many other retailers were charging. Pricing policies have been nutty ever since I can remember, with manufacturers' rebate plans that have all kinds of fine print.

The article quotes Johnson & Johnson as stating that 60% of their products' consumers actually saw lower prices as a result of this new price floor, because the rebate policies were simultaneously retired. But as a dedicated user of those rebates, I was looking at about a 33% increase in the price of my contacts.

To complicate matters, it also appears that my health insurance plan, new as of this year, partially covers the cost of contact lenses. I discovered this after speaking over the phone with an associate at my optometrist's office, or exactly whom the manufacturer was probably hoping I would turn to after the pricing policy was enacted. On net, I suspect my out-of-pocket expenditures on lenses may end up falling by almost 40% because of new insurance coverage and my optometrist's promotional discount.

The Times article quotes a trade publication that in turn reported remarks from the president of Johnson & Johnson in a 2014 letter to optometrists. She described their UPP as "refocus[ing] the conversation between the doctor and the patient on eye health and product performance rather than price," and as "giv[ing] the optometrist the ability to improve his or her capture rate in the office." In my case, the second of those two goals was definitely achieved. But as a long-time wearer of the same brand of contacts, I experienced precisely zero refocusing of the conversation about eye health and product performance.  The idea that a pricing floor is an effective mechanism for improving the quality of eye care seems dubious at best.