The integration of artificial intelligence into the pharmaceutical industry has led to significant transformation in the process of drug discovery and development and management of the pharmaceutical sector. Artificial intelligence has accelerated the process of drug discovery by several folds owing to its ability to analyse large datasets and predict drug–target(receptor) interactions, which effectively reduces the time and expenditure. AI enables clinical trial design and patient recruitment through predictive analytics during the trial. It also allows for real-time tracking of patient outcomes and predicts the effectiveness of a trial. Artificial intelligence-driven automation also assists in manufacturing and supply chain processes, enabling inventory optimization and predictive maintenance and thereby improving the productivity as well as affordability of these processes. The current review discusses various key applications, prospects, and challenges of AI in the pharmaceutical industry, focussing on its transformative potential while addressing the need for ethical and regulatory frameworks to ensure equitable and safe AI adoption.