I don't really see why it is cruel....or why anyone would think it's funny for that matter. I just seriously doubt the cat was scared...it was probably having a good time quite honestly. As for funny...yeah don't see that either..it was just sort of splayed out there, wasn't doing anything goofy and in general the situation isn't comical as the cat is probably confused - something that is not hard to do to an animal I might point out.
If they had a good reason to test the drug on the cat (ie a scientific experiment where they were trying to learn something) then I don't really see any big ethical problem with it provided they weren't OD'ing the cat. The only kind of testing on animals I would call into question morally are tests that actually have longterm impact on the animal after the testing is over or tests that don't actually serve any purpose. Even then there are circumstances where testing that does have a long-term impact can be ethical as well, particularly where research might serve to save lives and particularly when using animals that are going to be euthanized and participation in the test will save them.
I know some think no testing of any kind should be allowed...but I would point out that the drugs Fluffy and Spike might some day need from your Vet to stay alive can only be prescribed to the lovable furball if research like this takes place. It is perfectly reasonable to require the most humane methods possible and even to limit testing so that a single animal isn't kept in tests for a decade etc....but ruling it out entirely is, in my view at least, fairly shortsighted.
Really the main crux of the issue is consent. And if your OK with people keeping cats and dogs as pets then you're already past that anyways since this is itself is a declaration that you know what's best, so you give them no choice but to come live with you, tell them what to eat, where to crap/piss, and should they try to flee you track them down and bring them back. Effectively you're already supplanting their choices with your own, for which there are plenty of good rationalizations but the underlying facts remain the same - their choices are made by you.