The pills were discovered by the Survivors during their escapes from zombie-infested locations. Bill supposedly intended to spread the pills over the map but failed. The Smoker's father once tried to use the pills himself, but he fatally exploded and thus unintentionally spread the pills over the area.
The pills can temporarily heal the Survivors, quite faster than with medkits. The Smoker tends to eat the pills which rather than healing him gives a deadly smell, fatal to any Survivor who isn't Louis. The Boomer created an invention called the Pillbomb, a combination of pills and a pipe bomb. The Survivors were attracted by the bomb and died by its explosion, proving the Boomer's creation a success.