In terms of Medicine's optimal use in regards to its medical potency: medicine is best used for treating diseases and infections; it's overkill for standard injuries (unless a pawn is bleeding out so rapidly that they'll bleed out even before herbal medicine treats the wounds), but also isn't good enough to reliably perform surgical operations - unless the doctor is bionic and is enhanced by potentially luciferium and go-juice in conjunction, or is a trauma savant. If you use ordinary medicine in surgical operations, you are generally going to be taking a somewhat significant risk, as you're less likely to succeed with ordinary medicine in Alpha 16 compared to if you were to use herbal medicine in Alpha 15.
Although there's a lot of talk about Medicine when it comes to diseases; ordinary Medicine is still adequate for treating even the plague and malaria with ordinary beds, providing that the patients are rested at all times and well-fed, treatment is prompt, and a healthy doctor with at least 8 or 9 medicine skill (even without the use of the holy grail that is penoxycyline).
Medicine can either be looted from pirate raiders, purchased from outlandish/orbital traders, or manufactured at a drug lab using herbal medicine, cloth, and neutroamine. For the latter option, only people with at least 6 medicine and 3 crafting can produce medicine.