The Indian traditional systems of medicine have been Ayurveda, Siddha and Unani. Ayurveda and Siddha originated in India, whereas Unani, the Greco-Arabic medical system, came from West Asia. The European colonizers brought the western system of medicine to the country. During the colonial period, the new pharmacy system, referred to as allopathy got firmly established. After independence, many investigators chose to explore the history of modern pharmacy in India and related aspects of the span covering the last several centuries.

The earliest pharmaceutical companies in India are Bengal Chemicals, East India Pharmaceutical Works Limited, IDPL, etc., which exist even today as one of the five government-owned drug-manufacturing units. The government started to encourage the growth of drug manufacturing by Indian companies in the early 1960s, along with the implementation of Patents Act in 1970. The industry oriented pharmaceutical research started in late 1980s, with the support from the University Grants Commission, New Delhi and subsequently sponsorship continued from the Indian National Science Academy, New Delhi.

However, economic liberalization in 90s enabled the growth of the industry to become what it is today. The Patent Act removed the composition patents from food and drugs. Though it retained process patents, the duration was shortened to a period of five to seven years. The lack of patent protection made the Indian market undesirable to the multinational companies that had dominated the market and they streamed out. Indian companies carved a niche in both the Indian and world markets with their expertise in reverse engineering, yielding new processes for manufacturing drugs at low costs. Although some of the larger companies have taken initiative towards drug innovation, the industry as a whole has been following this business model until the present.