Dear Ensapa,
I have worked with people with mental health problems for around eight years now and been practicing Dharma for longer.
You said that the medication is not helping much and is making your friend inert, Olanzapine does often make people like that, maybe he could try a lower dose or another medication, there are quite a few around and it is often a trial and error thing when it comes to mental illness. I guess this is because the Dr's don't understand the mind or the causes of mental ill health so can't treat the causes, only the symptoms. Only Buddha can understand the causes properly.
In my opinion alot of mental ill health, psycosis etc, comes from or is exaserbated by increased self grasping ignorance, people believe the strange thoughts they are having and often feel as though they are coming from outside of themselves. It is great that your friend has a conection with the Wisdom Buddha Dorje Shugden, as he will be able to bless him to reduce his self grasping. I have had quite alot of times when I have been with someone in a very strange situation and when I have turned to Dorje the situation has changed and the person seems better.
One thing that can help the person is to not oppose or confirm his strange ideas as this can compound his self grasping, just remain neutral and friendly.
Hope this is of some help.
Kind regards,
G R