First of all, welcome to TP.
Are you in the UK? I ask because NICE guidelines now preclude giving AD medication to people in the early stages. However, although these drugs may not be effective for everyone, I have never, repeat never, heard a medical professional claim that group therapy is a subsitute. If you're in the UK, it may be all he can offer on the NHS, but that's not the same thing at all. If you're elsewhere in the world, I would suggest finding a doctor that is more in tune with current prescribing practices for AD.
It is fair to say that the medications that are available for AD (see this fact sheet)
http://www.alzheimers.org.uk/After_diagnosis/Treatments/info_drugs.htm may not be effective for everyone. Also there are other medications that may be used for specific symptoms (such as paranoia or depression). I'm not saying that group therapy (or simply social groups) might not be effective at least in the early stages to allay the natural fears and depression that your MIL might be prone to, but to suggest them as treatment seems to be more than a little odd.
Best wishes
Jennifer
PS. The factsheets are a mine of information about all aspects of dementia. If you look at the top left of any forum page you'll see an
i Factsheet link.