Part of the reason for the fall off was, I think, offered by LeMond to Abt for his
Comeback book:That was 1989, so there's a cultural shift went on that the Italians were slow to embrace.
There's a change in 1990 or so (I'm plus or minus a year on this, I think) to do with FICP ranking points and earning entry to World Cup races and the Tour. In one of the cycling yearbooks that came out at the time ( I can't remember if the yearbooks were 1989 and 1990 or 1990 and 1991)) LeMond noted how this had impacted the peloton, made riders more mercenary, made races harder and faster (he specifically references the speed of Milan-Sanremo IIRC). Because of lockdown I have very few of my cycling books to hand so can't check this, maybe you can see if it's represented in the stats you have to hand.
The simple point I am making here is that things changed but the change's explanation is not just doping.
On the money side of things: Italians had been to the fore in the big bang of bucks that happened in the 1980s (see the financing of Moser's Hour). Like you, I'm not sure a lack of money can explain their fall off in performance. What I would say is that the arrival of money didn't necessarily help the sport in Italy, not if you look at guys like Visentini who seemed to prefer spending it than earning it. Perhaps there is a 'lost generation', between Moser/Saroni and Bugno/Chiappucci. You probably have better stats on that than I do.
To go back to a doping-related explanation: I think the French were able to hold their own in the 80s with hormone rebalancing and they didn't advance much beyond that. The Italians, on the other hand, were embracing blood doping (we see it at Hoonved, Gis, and Carrera) as were the Dutch (PDM 'discovered' it independently of the Italians). The Spanish were also coming up at the time, unfettered by heritage - Raynolds were breaking the mould as were ONCE - which may have allowed them to play with blood bags early in their history (the evidence is, I think, circumstantial but it's a compelling narrative).
To marry the cultural and the pharmaceutical: once the Italians balanced the equation - made the cultural shift - they were able to pull ahead, particularly of the French, who I think stayed stuck in era of Bellocq and that horse doctor.
On the cost of EPO: it's something I'm paying more attention to these days but yes, in the early years, it wasn't as cheap as legend would have us believe.