Without additional details it's difficult to make an accurate judgement. If the manager referred the friend and they went through the typical interview process

Without additional details it's difficult to make an accurate judgement. If the manager referred the friend and they went through the typical interview process and got the job on their own without any undue influence from the manager/friend - then the issue may be with the OP's performance or some other change on the team. But if the manager short-circuited the typical hiring process and just stuck his friend on the team then it's clear-cut nepotism and OP can't escape it without sidelining their manager within the organization.