The doctors probably are lying.
Your other friend has been brainwashed by extreme right-wing ideology. Perhaps he's been reading Thomas Szasz. He should be medicated at once.
In practical terms, I have no idea what to do with someone who's schizophrenic, other than (just rules of thumb): (1) don't ignore the problem; (2) don't trust doctors to know what they're doing; (3) research all prescribed medications; (4) try to find a support group, for yourself and/or your friend and/or their family; (5) expect them to abide by the same standards of rationality and decent behaviour as anyone else; (6) also expect to learn from him just as you would from anyone else, don't pretend to know it all just because you are 'normal' in comparison (I'm not implying that you do, and the fact that you are asking these questions speaks well of you); (7) don't force normal social conventions on them, except those implied by (5), or for their own safety in a hostile and uncomprehending world; (8) read Arieti, or any other good book you can find (be critical!); (9) don't believe anything I tell you, or anything else anybody tells you on the Internet; (10) talk to your friend (if he'll let you); (11) try to find out what he thinks he needs from you (not what I or any other random Internet kook thinks, or what any doctor thinks); (12) trust your own judgement; (13) try not to let him drive you mad (he's almost bound to try, knowingly or unknowingly), and keep up your other contacts; (14) see if some form of supportive individual counselling is available; (15) be very wary of 'psychotherapy', especially 'group therapy'; (16) consider the possibility of finding a 'therapeutic community' for him (but I've had absolutely terrible experiences of two of those, so be very wary of them, too - again, use your own judgement, it can't be said often enough); (17) try to be as sane as you can for him, when he can't be sane for himself (he'll probably be relying on you for this, whether you or he know it or not, and the strain on you could be enormous, so take care, especially take good care of yourself).
I appreciated the combination of knowledge, common sense and humanity in your post. I hope you don't mind my adding a few points. I'm not an expert. Since I naturally write with an arrogant, opinionated style, my posts sometimes come across as know-it-all. So I re-iterate, I'm not an expert.
1) My first addition would be simply to re-emphasize the importance of not dehumanizing a person with a mental condition -- specifically, not to replace the whole person with a label. This principle, IMO, applies across the spectrum of physical and mental conditions.
There is a tendency among family and friends, some well-meaning therapists, and, of course, patients themselves, to replace someone's human complexity with a "label"; this is especially true with mental conditions. How would you feel if you were found to have a chronic heart condition, and then found that others' perception of you had changed from "Joe, my friend, brother, etc.", to "Joe with the Bad Heart"? If they could no longer enjoy certain activities, certain foods, etc., in your presence -- because they always seemed to be watching you for symptoms? If they stopped talking about particular subjects with you? Good luck getting a date! You'd probably start thinking more and more about your "condition", and in time, that label might become the center of your life, your self perception.
I'm not suggesting that we completely forget about mental conditions in ourselves or others, just that we keep them in perspective as a part of a much larger whole.
2) The second "sin" I've seen too much of is, frankly, mediocre physicians and therapists. And they're usually the most adamant about the correctness of their diagnosis and treatment.
The best outcomes, IMO, come from physicians/therapists who treat each person individually. Psychiatric "labels", with the exception of the rare "textbook" case, are no more than guidelines,at least to a competent practitioner. Apart from the obvious uniqueness and complexity of each person's psyche and history, in less-than-clear psychiatric cases, sometimes two or three diagnoses could appropriately be applied, all of them fitting the symptoms and signs partially, none fitting symptoms/signs 100%.
Physicians and therapists absolutely must be able to "think out of the box" with every patient, view every patient as an individual, and place high value on the input of the patient and family/friends. If a therapist cannot do this, then find one who can; those who are limited to labels and textbook treatments do more harm than good.
3) Related to #2, if a patient or family/friends is uncomfortable with a medication's effect or its side effects, any "good" psychiatrist will be very interested in specifics, ascertaining what exactly is "not right" about the medication. He should be quick to answer your questions about alternative medications. If medication complaints are only casually regarded or are over-generalized (well, that's normal -- don't worry about it) by the practitioner, find another practitioner.
4) Related to #3, unfortunately many (most) drugs do affect more than the target area of the brain, and do have side effects. There must be frank discourse between physician and patient about positives/negatives of any medication. The patient should, as much as possible, be involved in decision making -- but with mental conditions which affect a person's cognitive ability (or thought processes), as schizophrenic-type conditions often do, sometimes the physician or family has to insist on and monitor certain medications. As with 3, the physician should be able to competently answer questions about alternative medications -- if his answer sounds uninformed, it probably is.
5) There are way too many "therapies" on the market -- it's difficult to discern which ones may be effective. Many therapists seem too focused, IMO, on making the patient fit the theory.
The best indicator of a therapy's potential is, in most cases, the feelings and responses of the patient or family/friends. If a therapy or therapist seems "stupid" and ineffective, it/he probably is stupid and ineffective. If a therapy requires time to show positive effects, find out, in the beginning, how much time can be anticipated before improvement is seen. If there is no time frame, the therapist should at least be able to explain to you why in a clear, informed manner -- if the therapist sounds like a used car salesman, Danger, Will Robinson!
The next best indicator, IMO, is supportive credible psychiatric and neurological studies. Every quack therapy on the market will offer "evidence" of its effectiveness, but by asking about "hard" neuropsychiatric evidence, you can filter out some of the bad ones
6) I hate to bring up this term, but there are some new "music therapies" showing great promise -- and there are many more music therapies that are stupid and ineffective. Again, as with any treatment, the patient and family/friends should be involved in therapy choice. Many patients don't really feel comfortable sitting on the floor banging toy cymbals -- as most people would not.
The music therapies (of which I am aware, anyway) that are showing some amazing results with not only mental conditions but also brain injuries, stroke, hypertension, neurological conditions, etc.. fall under the umbrella of "neurological music therapy" (NMT). In the few studies I've seen, the most effective therapies are almost "common sense" music therapies, for example, playing a coma patient's favorite song. I have not yet read a hard study of some weird, counter-intuitive music therapy proving effective. HOWEVER, this an exploding field, so who knows what the future holds.
I'll end with three links that look good, to me, as starting points for independent research and/or consideration.
Neurological Music Therapy:
Oliver Sacks, M.D.
NOVA | Transcripts | Musical Minds | PBS
Schizophrenia as a Neurologic Disease
A Hypothesis: Schizophrenia is a Neurological Disease