Water changes to get that down are essential - daily or more if needed. You can protect the fish from the effects of the nitrite between changes by double-dosing Seachem Prime, or by adding a little salt to the water. See this article on dealing with ammonia/nitrite spikes: https://www.fishkeeping.co.uk/articles ... ammonia-nitrite-spike.htm
That looks likes some kind of tumour. It may be benign in which case unless it grows so much that it interferes with his eye, he should be able to live with it. If it grows over the eye you'll need to find a fish vet to remove it.
From the ingredients it should be a safe medication so I'm surprised you lost a fish. Have you tested for ammonia, nitrite and nitrate? Did you use the correct dose? You need to leave it in for a few days so as the remaining fish are lethargic I wonder if the medication has depleted the oxygen in the tank. Adding an air stone may help.