The medicine contained six times the normal amount of a chemical ingredient used to lower blood sugar, and is believed to have been distributed at many places across the country, the official Xinhua News Agency said.
The case highlights China's shoddy record in food and drug safety. Last year, at least six babies died and nearly 300,000 were sickened by infant formula contaminated with an industrial chemical that can cause kidney failure.
Xinhua said the two were detained in Liaoning province in northeastern China in connection with the sale of the diabetes drug. tamper
Xinhua said one of the men arrested is the brother of the main suspect in the case, Li Dong, a native of Liaoning. Li Dong is still at large.
The diabetes drug killed two people in the far western Xinjiang region last month and sent nine others to the hospital.
Authorities found 10,000 bottles of the medicine and arrested five suspects in Xinjiang, Xinhua said. One man was found selling the drug from a rented house, where he gave free lectures and performed blood sugar tests.
Another 4,800 bottles were found in western China's Qinghai province, and 215 bottles in southwestern Sichuan province, according to China National Radio and government Web site china.com.cn. Most of the medicine has been recovered by authorities, reports said, and none of it appears to have been exported.