The discovery of induced pluripotent stem cells (iPSCs) in 2006 was a major breakthrough for regenerative medicine. The establishment of patient-specific iPSCs has created the opportunity to model diseases in culture systems, with the potential to rapidly advance the drug discovery field. Current methods of drug discovery are inefficient, with a high proportion of drug candidates failing during clinical trials due to low efficacy and/or high toxicity. Many drugs fail toxicity testing during clinical trials, since the cells on which they have been tested do not adequately model three-dimensional tissues or their interaction with other organs in the body. There is a need to develop microphysiological systems that reliably represent both an intact tissue and also the interaction of a particular tissue with other systems throughout the body. As the port of entry for many drugs is via topical delivery, the skin is the first line of exposure, and also one of the first organs to demonstrate a reaction after systemic drug delivery. In this review, we discuss our strategy to develop a microphysiological system using iPSCs that recapitulates human skin for analyzing the interactions of drugs with the skin.