Biotechnology is a broad area of biology, involving the use of living systems and organisms to develop products. Depending on the tools and applications, it often overlaps with related scientific fields. In the late 20th and early 21st centuries, biotechnology has expanded to include new and diverse sciences, such as genomics, recombinant gene techniques, applied immunology, and development of pharmaceutical therapies and diagnostic tests. Biotechnology has also led to the development of antibiotics. Biotechnology has applications in four major industrial areas, including health care (medical), crop production and agriculture, non-food (industrial) uses of crops and other products and environmental uses. In medicine, modern biotechnology has many applications in areas such as pharmaceutical drug discoveries and production, pharmacogenomics, and genetic testing. Pharmaceutical biotechnology is a relatively new and growing field in which the principles of biotechnology are applied to the development of drugs. A majority of therapeutic drugs in the current market are bio formulations, such as antibodies, nucleic acid products and vaccines. Such bio formulations are developed through several stages that include: understanding the principles underlying health and disease the fundamental molecular mechanisms governing the function of related biomolecules synthesis and purification of the molecules determining the product shelf life, stability, toxicity and immunogenicity drug delivery systems patenting and clinical trials. This review article describes the purpose of biotechnology in pharmaceutical industry, particularly pharmaceutical biotechnology along with its prospects and challenges.