Abstract: This paper empirically estimates the magnitude and the associated determinants of profit margin that medical providers earned from the prescription drugs in the context of Taiwan’s pharmaceutical market where physicians both prescribe and dispense drugs. We first trace the difference between retail price and wholesale price to calculate the profit margins for 795 pharmaceutical products. We then empirically estimate the determinants of the profit margin to test several hypotheses regarding the prediction of the countervailing power in the pharmaceutical market. The data used in this study come from two sources: (1) the population claim data compiled by the National Health Insurance Database; and (2) price adjustment lists released by the single public payer in Taiwan.