This paper presents a “history-friendly” model of the evolution of the pharmaceutical industry. The degree of concentration has been consistently low during the whole evolution of the industry. The simulation results investigate the factors that we believe to be relevant in order to explain the evolutionary pattern of pharmaceuticals. In particular, first, we focus on the relationship between market structure and innovation with regard to the nature and technological characteristics of the innovative activity. Second, we investigate the role of fragmentaed nature of the market in shaping industry concentration.