This makes a sort of sense, but only if you know little about the drugs in question - antipsychotic drugs, formerly known as neuroleptics - which do not target nor act on any demonstrated pathology, lesion, or abnormality. What the drugs
do do, as much in dementia as in psychosis, is "make it so [you] can't think", as Walter L. tells us. To the extent that anyone, with any diagnosis, is helped because of these compounds, it's because of their extreme tranquilizing effects on both the mind and visible behavior.
You're right that the ethics of the whole thing aren't clear. But a fair discussion of the ethics of cautiously using these drugs for dementia in willing participants - much less rampant, off-label uses in contexts for which there's no empirical evidence of their effectiveness (no FDA indication for any of these drugs for any dementia) - would include an honest conversation about the historical uses of prescribed psychotropics, and of political and economic power in the mental health professions and medicine more generally. Such a historical look would show that stories like this one are far from an abnormality, and that coercion, to greater or lesser degrees, is the norm. Some proportion of people taking these drugs (for any reason) undoubtedly do so of their own volition, and some of these may even derive a benefit from them. I have no objection to this. But vast numbers of people have no such luck, and are forced to take these drugs for some reason or another.
Many of these people are difficult: they're old and agitated and their dementia's getting worse, or perhaps they're yelling to themselves in the street, half-naked, rambling incoherently and looking fairly menacing, etc. What do the rest of us want with difficult people? We want'em out of our way (in a nursing home, say) and we want'em nice and calm. The drugs in this article do exactly that. No one with enough time in the mental health professions, or in geriatrics, is under any illusions about this.
"They want docile" is exactly right. So any discussion about the ethics involved here should also ask: "what are the ethics of coercing people to calm down with drugs?"