The pharmaceutical industry is one of the world's most important manufacturing sectors. However, in the last few decades, the ever-faster development of new products, the loss of revenue due to the expiration of patents and strict legal regulations have been obstacles to the development of the pharmaceutical industry. The pharmaceutical industry is investing large resources in the development of new drugs. Therefore, high costs often limit scientists to enter the process of research and development in the research of new molecules of interest. In order to generate revenue that will fund research and development of new drugs, pharmaceutical products will enable the protection of industrial property. Innovation is the key to achieving economic and social success in today’s globalized business world. Drug innovation involves intensive research that encompasses knowledge of the mechanisms that drive the process of drug discovery and development. The foundation of competitive advantage in the pharmaceutical industry lies in successful innovation and the basic product of the pharmaceutical industry is concentrated on a new molecule. Therefore, the aim of this paper is to explain the concept of innovation and the process of innovation management in the pharmaceutical industry and to explain the fundamental factors that determine the final success. Since exclusivity in the use of knowledge encourages investment in innovation, forms of intellectual property are explained, with the focus on patent as the most effective form of intellectual property in the pharmaceutical industry. An analysis of the current situation in the world with the focus on Europe was conducted in order to confirm both theoretical and analytical part, and defined research hypotheses.