SHANGHAI (REUTERS) - Chinese police have detained 37 people linked to a vaccine scandal and are investigating three pharmaceutical companies, state news agency Xinhua reported on Wednesday (March 23).

The case involves nearly US$90 million (S$122.5 million) worth of illegal vaccines, against meningitis, rabies and other illnesses, that are suspected of being sold in dozens of provinces around China since 2011.

Chinese Premier Li Keqiang said the incident had exposed many regulatory loopholes and ordered authorities to undertake a thorough investigation, according to a statement posted on the government's website late on Tuesday.

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 homegrown 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 licence revoked, it said.

It also said China's top court would oversee the vaccine case directly.

On Tuesday, China's drug regulator identified nine vaccine wholesalers from six provinces suspected of filing fake reports of buyers' identities.

Police said a mother and daughter in Shandong had illegally bought vaccines from traders and sold them on to hundreds of re-sellers around China, according to a notice from the Shandong Public Security Department.

Authorities should improve the regulatory system surrounding vaccine production and distribution, Premier Li said, and dereliction of duty related to accountability would not be tolerated.