We review the development of terahertz (THz) technology and describe a typical system used in biomedical applications. By considering where the THz regime lies in the electromagnetic spectrum, we see that THz radiation predominantly excites vibrational modes that are present in water. Thus, water absorption dominates spectroscopy and imaging of soft tissues. However, there are advantages of THz methods that make it attractive for pharmaceutical and clinical applications. In this review, we consider applications ranging from THz spectroscopy of crystalline drugs to THz imaging of skin cancer.