The 2017 Guidance by U.S. Food and Drug Administration (FDA) has recommended the criteria to qualify for a Biopharmaceutical Classification System (BCS)-based biowaiver that includes high solubility of the drug across the physiological pH range as well as the formulation considerations, e.g., being qualitatively the same and quantitatively very similar to the reference product. These were ratified by the International Council for Harmonization (ICH) in 2018. The FDA has used the similar verbiage when referring to the BCS-based biowaiver option for BCS class III drugs (highly soluble but poorly permeable). However, establishing in vitro-in vivo correlations (IVIVC) using conventional mass balance deconvolution approaches, which assumes a single absorption compartment, is not likely for very rapidly dissolving dosage forms containing BCS III drugs. Unlike conventional mass balance deconvolution techniques, physiologically based pharmacokinetic models are able to disentangle different processes contributing to the input function, e.g., dissolution, gastrointestinal transit, and permeation and to establish IVIVC using variants of the compartmental absorption and transit model, supporting biowaiver for formulations containing BCS III drugs. However, there are knowledge gaps that need to be filled.This review provides a systematic assessment of the advancements in applications of physiologically based pharmacokinetic (PBPK) models for IVIVC and biowaiver for such cases with the aim of identifying the most important gaps and hurdles. It concludes by calling for research efforts on the impact of excipients on dissolution and permeation, alongside the development of PBPK modeling to link these in vitro characteristics to in vivo bioequivalence outcomes through simulations of virtual clinical studies