Red Wine:
What would you do if you knew your colleague has a medical deficiency that would disqualify the normal aviator,
Define medical deficiency, a clearly obvious physical impairment - no brainer. However you seem to imply something not visibly obvious by the following:
but due to an old boy network with his favourite medical man, he can retain the appropriate medical level and continue to fly?
So what is the condition that would preclude the correct medical standard and which you seem to think a well paid medical professional would risk his career to hide or ignore?
Equally as important, how would you act, if your colleague was “mentally” questionable? What I mean is that he was displaying those unusable characteristics that made you question his stable mental attitude.
Two years ago I did just that. My buddy and I are good friends and have been for quite number of years. Over a week or so, I realised that he was behaving uncharacteristically. I talked to him about it but he was not being very forthcoming. Later and following medical intervention, he was grounded for some time due to an obscure and not very common problem requiring a serious operation.
I reported the matter to my chief pilot but as I found out later, that was unnecessary because my buddy had already taken the correct steps. Fortunately we are back flying together and he is 'normal' again.
e.g., “talking about the value of life”, “unusual and abnormal behaviour”.
Some of the conversations I have had in the cockpit if recorded, would certainly condemn me to an institution

and I am sure you might be able to say the same eh?
And finally, how would you handle your alcoholic or drug addict colleague. He or she who passes the annual medical [must lie about the alcohol / drug use consumption question]. He/she never fronts to the flight line intoxicated, but it’s a known [proven] fact that after knockoff time, they become a blithering mess.
Alcoholism and drug abuse does present tell tale signs that are detectable by a medical professional. Answering questions - well I put it to you that the purpose of the questions is to found a base line from which other inferences are made and which ultimately 'colour' the interpretation of other results.
How would you [or how do you] address this situation?
The overall surrounding circumstances of a situation each have an effect/consequence that forms a reference framework within which a given scenario can be correctly assessed and that in itself will necessarily be subject to variability should one or more of the reference values alter. Without clear definition of the framework all you have is a 'best guess'. You cannot take positive action on that basis without potentially dire results.