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Kolto was a liquid form of healing liquid applied in a method similar to that of the Thyferran serum, also created on the planet Manaan, an aqueous world found in the Inner Rim. It was here that a giant creature known as Progenitor produced kolto; it's life inextricably linked to that of the drug.
The native Selkath mediated the use of kolto and sold it to both the Galactic Republic and to the Sith Empire, not wanting to get involved in the Jedi Civil War. However, becoming desperate for the medicine, Republic emissaries made a deal with several key members of the Selkath Government — who saw that the Sith would destroy them should they defeat the Republic — to construct an underwater facility in the Hrakert Rift and mine for kolto at their own expense. Kolto, being found only in Manaan's deep-sea chasms, could easily be mined without detection if one could reach them.
Kolto was still in use during the Galactic Civil War, though it seemed to have been almost completely replaced by bacta in the Galactic economy. It is unknown what exactly caused the demise of kolto, though various theories existed. One was the suggestion that kolto gradually lost its effectiveness, and that as beings required more and more for the same level of healing the market collapsed. Or possibly the invention of the more easily produced bacta broke Manaan's monopoly on medical supply, which faded into disuse.