Yeah if she's not going to listen to reason then let her fall to rock bottom. Sometimes you need to let them taste reality before you can reason with them. Just restrain by force if they wind up going to the point of physical harm to herself or others.
No it does not make you a bad friend. It makes you a good person for telling someone to avoid a bad person like her. Friends are people that share an equal relation...not one that feeds off the other. The latter is a parasite.