This study systematically examines the practice and outcomes of the coordinated mechanism between medical insurance payment and pharmaceutical price management within the health insurance system in China’s Taiwan Region. Under the framework of the Health Insurance Act, Taiwan Region has established a closed-loop management system centered on “formulary inclusion-payment standards-dynamic price adjustments”. Relying on the drug expenditure target (DET) mechanism, it achieves a balance between cost containment and accessibility, effectively controlling the growth of healthcare expenditures while ensuring the availability of innovative drugs. The research indicates that its global budget payment system, categorized drug price adjustments, and risk-sharing mechanisms offer valuable insights for the ongoing Diagnosis-Related Group (DRG)/Diagnosis-Intervention Packet (DIP) reforms in Mainland. These insights are particularly relevant in areas such as the linkage between payment standards and drug price, the evaluation of innovative drug access, and the coordination within primary care.