There is still a huge potential for earning by investing in something like this, even with restrictions as described.
You're assuming that someone else can make it work financially in the original domain, but what if no one can?
The IP may have value in other domains, but you seem to be saying that it goes into the public domain if no one can make it work in the original domain.
If that's the rule on IP with medical uses, medical applications just went to the bottom of the list of uses. In fact, you'd be stupid to go for a medical application of IP that is used elsewhere.
Well, they can sell it to someone who is willing to continue supporting it for the use that the original company couldn't make work.
or release it into public domain
Yeah, that "lose it" part is the problem - if they can't find a company that's willing to continue supporting what was already proven to be an unsuccessful use case, then their IP has no value.