There are three solutions:
1. Don't use a flash. The issue is that when a flash is close to the lens the light reflects right back, unless you've got a pro camera with an external flash redeye is a problem.
2. Have your friends remove and/or close their eyes when you take a picture. This is often difficult at first, but once you pin them to the ground you'd be amazed at how well a spoon works. Typically this isn't the preferred solution, but some people just deserve it.
3. Many compact cameras that don't have redeye problems solve it through software (there's also some preflash techniques, but those are hard to do with an LED). Which camera application are you running? Have you experimented with any of the others in the market? Have you explored the settings for redeye reduction?