Woah! Defying you and doing a dangerous thing with this very friend? NO PARTY AND NO SLEEPOVER. For starters. And I'd add a lot more to it. Including some graphic lung lessons for sure. As far as I'm concerned it's like finding a bag and some toxic inhalants in the days of yore.
When tweens find the new self-destructive rush du jour: BOOM maximum penalty for going against you AND acting dangerously. The SWH is disturbing. These girls are already roped in to trying to be cool and obviously not worried about consequences AT ALL from their actions or from their parents and they aren't even 13 yet. So FAR she's a low risk A student....until she did this at age 12 after talking to you about how stupid it is.
My kids would lose whatever phone or gadget they were using for instagram as well. At under 13 she likely didn't pay for the gadget, the roof over her head, or the spices she's eating and burning herself with, and she needs to wake up to reality before later teen years. If you come down like a ton of bricks on this, I think you'll have no further issues if it's the first bonehead maneuver she's ever pulled. But for good measure, I think she needs a job and less time with that friend. I was babysitting and volunteering all the time at that age and my parents (love and logic wasn't invented yet) would have grounded me from that friend outside of school FOR SURE if I couldn't be trusted to behave with her. And I survived high school drug and pregnancy free.
If you just can't bear to let her miss her party, then you can't, that's your choice. But do SOMETHING very major so that she doesn't wiggle away from this as if it was not EXTREMELY serious to you on lots of levels.
To me, logic would be to remove the friend, the party, the late night freedom, and the gadgets used to participate in this on instagram until she earns back some privileges with some hard work and good behavior. You love her and you don't want her blowing her lungs out in attempts to be cool or anything similar to that in the future. Your motives are pure.