This chapter explores the challenges and advances in the pharmaceutical development of topical and transdermal dosage forms. It discusses key formulation challenges, including drug stability, solubility, skin permeation, and irritation. The chapter highlights advances in skin permeation enhancement techniques, such as the use of chemical enhancers, physical methods, and vesicular systems. Additionally, it addresses the challenges associated with establishing bioequivalence and meeting regulatory requirements for generic topical and transdermal products. Furthermore, the chapter examines manufacturing challenges and the need for process optimization and quality control. On the other hand, it also outlines the advances made in the field, including the development of novel drug delivery systems, personalized medicine, combination therapies, and continuous monitoring and controlled release technologies.