The devil is in the details. Your report is 750 words, which is roughly 1.5 A4 pages.
Let's say you took the 25 words literature description of the pathology: it will make 3% of your report suscetible of plagiarism suspect to automated plagiarims detection tools, and also to peers familiar with the work you are citing (not useful for the discussion, but please remember it is possible the reviewer is one of the author of the "just another similar case in literature", exactly because of that).
You can re-formulate that part in a couple of ways, as follows:
The pathology has been described in (REF, year) as
a well defined and separated literal quotation of the 25 words in a separate box
For the pathology description we forward the reader to its first description given in REF (year);
In the first case, you have a block describing the pathology, in the second case you save 20 words that can be better used in other parts of the report.
Although the editor is not accusing you of plagiarism, they clearly are not confident on the novelty or on the opportunity of publishing your work. Take the bite, improve your work and submit it for publishing somewhere else.
You may feel your work has been misinterpreted, we know only your side of the story and it may be that the reviewer wrongly missed you properly referencing previous work.
The reviewer may be wrong, the editor is supposed to spend some time on the paper under review, but the editor is now facing the situation where you submitted your best possible work and the reviewers found some big flaws in this work.
Since the editor is strongly rejecting your paper there is not much room for discussion: the wording "significant amount of text was from other publications" leaves no room for discussion.
Stick to the facts you are facing, not to the interpretation of their motives, the editor has nothing to gain to prove you have bad intentions (plagiarism!) or to prove you are simply naive/sloppy (no novelty, work is a repetition of referenced works), they are simply annoyed and they judge your work not worthwhile of theirs and other people time.
Do not worry for the long-term consequence to your reputation (not even for the short-term), the editor that rejected your work is unlikely to remember your name or to put you in a sort of black-list (unless you start arguing, escalating the situation).