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Red Pills are pills produced by the Ashura-kai. They transport the item through their territory and sell it to civilians and hunters so they can appease the demons. Demons find the pills tasty, and several NPC demons mention preferring them over eating humans. Others, like Kuebiko, are disgusted with their unnatural creation. In Shinjuku, it is revealed that if a human eats one, they will be turned into a demon; a Furious Hunter has distributed Reds to several humans, causing them to turn into Corpses. After all Corpses have been destroyed, he himself will ingest one to become the demon Dullahan.
In Shibuya it's apparently something of a fad for some humans to take Reds. It's due to this that Koga Saburo has stationed himself at Club Milton; he seeks to stop humans from harming themselves by ingesting Reds, in the meantime also striking a blow against Ashura-kai operations in the area and forcing them to use the Samurai apprentices as proxies to eliminate him.
In Midtown, Mastema is in charge of Red Pill production; he uses the position to ensure some peace in Tokyo through the Ashura-kai. He is well aware of how loathsome the production is, and only goes along to keep on doing his job and securing demon contracts for the criminal group to avoid major bloodshed.
In Reverse Hills the origin of the Reds is revealed: using Yaso Magatsuhi's sweet-smelling gas to process them, Reds are created by people being used as livestock and removing their brain matter, specifically their neurotransmitters, turning it into the pills. They are made from people taken from the underground cities and when they grown enough they harvest their brains. The people taken are turned into a seedbed and the neurotransmitters are removed, trying to keep damage done to the brain to the minimum so they can continue to use them to produce the substance.
Minako reveals that if one has a connection to the power of a demon when taking a pill then the chances of becoming a demon related to it is greatly increased, but there is a very high chance that the demon's mind will consume the originals. She goes on to prove this by consuming a Red after absorbing Astaroth, Asherah and Mother Harlot to recreate Ishtar.
The Shin Megami Tensei IV DEMONIC GENE manga shows Red Pills, despite the U.S. version's name, are actually palm-sized orbs, seeing as they are originally described as "Red Orbs."