I have to disagree with this statement and ask you to provide better sources than just the result of some Google search. The evidence gathered with citations to peer-reviewed literature in one of the definitive medical textbooks on the issue,
http://www.amazon.com/Manic-Depressive-Illness-Disorders-Rec...
strongly suggests that lithium for bipolar mood disorders has long term benefit. (That's based both on the decades of human use of lithium in some countries and on the basis of animal studies followed up by necropsies of brain tissue.)
Apparently we are all in agreement that "self-medication" with alcohol is a very bad idea. But prescribed medication under supervision by a medical doctor can be a very good idea indeed.
After edit: Thanks for the mention of the interesting book in your reply. I read some of the reviews, and found this useful interview
http://www.salon.com/books/feature/2010/04/27/interview_whit...
with the author, who has a balanced point of view:
"Q: So do you think psychiatric drugs should be used at all?
A: I think they should be used in a selective, cautious manner. . . . I think we should look at programs that are getting very good results. This is what I love about Keropudas Hospital’s program in Finland. They have 20 years of great results treating newly psychotic patients. They see if patients can get better without the use of meds, and if they can’t, then they try them. It’s a best-use model, not a no-use or anti-med model."
After one more edit, an interesting review of the book mentioned in the reply to first version of this post:
http://carlatpsychiatry.blogspot.com/2011/01/anatomy-of-epid...
Also, that Finland program as described in Anatomy uses very few psychiatric drugs, and it does in low doses and tries to keep people off them. Whitaker is just explaining that his opposition is not to 'psychiatric drugs' like some groups, but to unscientific & harmful practices, which is exactly what gives him so much ethos. The Finland program is from what I remember of it, far from modern psychiatric practices.
In fact, in my email communication with Whitaker, he has stated that no patients would miss antipsychotics if they were banned. Based on his books and many interviews/videos I have seen of Whitaker, I think he would probably agree with the statement "The way most drugs are prescribed, they make the illness worse in the long-run." (note I don't know Whitaker personally)
This is a very complicated debate because one can't talk about psychiatric drugs in general, you have to look at the individual evidence for each one. For example, I have much less faith in the Harrow Study that Whitaker cites as evidence that antipsychotics do worse, because I found the critique that its just the worst patients who stay on antipsychotics very salient. This study indicated the health of the off-med and on-med groups diverged after two years (with the off-med group improving significantly.) However, there seem to be a dearth of studies that are this long testing antipsychotics versus placebo (because of the inherent difficulty of that study, I imagine).