The case involves nearly $90 million worth of illegal vaccines, against meningitis, rabies and other illnesses, that are suspected of being sold in dozens of provinces around the country since 2011.
The vaccine scandal underlines the challenge the world's second-largest drug market faces to regulate its fragmented supply chain, even as Beijing looks to support home-grown firms.
Xinhua said the arrests were made by police in Shandong, the eastern Chinese province at the heart of the scandal. One of the three firms being investigated, Shandong Zhaoxin Bio-tech Co., has been ordered to halt operations and had a license revoked, it said.
It also said that China's top court will directly oversee the vaccine case.
China's drug regulator on Tuesday identified nine vaccine wholesalers from six provinces suspected of filing fake reports of buyers' identities.
Local police said a mother and daughter in Shandong had illegally bought vaccines from traders and sold them on to hundreds of re-sellers around the country, according to a notice from the Shandong Public Security Department.
