I’m surprised about this attitude to IM Adequan. I’ve seen it be effective on arthritic horses.
As far as the lease goes, that depends on your contract. If you are going month to month, you say:
I would like out of this lease until Pony is totally sound and cleared for work again. I can’t keep up my end of the bargain of schooling him for you if he’s off behind.
Send horse home and see what happens.
It’s not up to you to take on talking sense to them about price or value or expectations. Send the horse back on the expectation he is then out of your life.
You do not want to buy a horse that is breaking down under your level of schooling. If you already owned him you would need to do the hard work of diagnostics, treatment, rehab, stepping down, etc. But you do not own him.
Send him back, let go of the situation.