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Basically his wife didn't believe he had the condition and tests him with the insulin injection and dies. (Shades of Inception). However Guy Pearce is convinced there is still a killer out there and eventually does track one down. But he ends up forgetting this as well and still is obsessed on finding the killer. Joey Pants basically takes advantage of his condition by leading him on. Pearce figures this out and tricks himself into thinking that Pants is the killer when he starts remembering again. That's a pretty rudimentary explanation.
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