The ability to convert human somatic cells into induced pluripotent stem cells (iPSCs) is allowing the production of custom‐tailored cells for drug discovery and for the study of disease phenotypes at the cellular and molecular level. IPSCs have been derived from patients suffering from a large variety of disorders with different severities. In many cases, disease related phenotypes have been observed in iPSCs or their lineage‐specific progeny. Several proof of concept studies have demonstrated that these phenotypes can be reversed in vitro using approved drugs. However, several challenges must be overcome to take full advantage of this technology. Here, we highlight recent advances in the field and discuss the main challenges associated with this technology as it applies to disease modelling.