In the pharmaceutical industry, large-scale research and innovation have been broadly recognized as the major drivers of performance. While this paradigm is still valid, owing to the need to increase firms dimension in order to cope with the high risks related with innovation processes, it would seem that is no longer the only feasible strategy. Empirical research point to a poor corporate performance after mergers and acquisitions. Even in Italy small and medium- size firms prove to be more successful than bigger ones; the evidence resulting from an econometric exercise, we have carried out on a set of Italian firms, is consistent with the fact that the firms' dimension has no significant impact on performance. Many factors are contributing to a change in the industry structure. For example, the increasing difficulties in discovering new chemical entities and, in particular, new "blockbuster" drugs (while the existing ones have recently lost, or are about to lose, their patent protection). The advent of pharmacogenomics is rapidly changing the features of the research process, reducing its time, costs and probability of failure and, at the same time, is segmenting demand because new drugs are more specifically targeted. Even regulation can give medium-size firms a competitive advantage, due to their greater flexibility, which allows them to tackle a highly perturbed environment. Interviews with the top management of medium-size Italian pharmaceutical firms have confirmed that innovation, specialization and active internationalization are recognized as the key drivers of good performance. In order to operate in this new context firms should integrate themselves in large (international) networks, to benefit of economies of specialization. Besides they should rapidly enter more dynamics markets, to secure return on investment and profitability. As a result, support to network creation, regulatory stability and tax policies would seems to be the major issues to be cope with by public policies in the pharmaceutical industry.