You have to click on a DOCUMENT and select OPEN WITH and then select Password Protect.
You can then select the document (again?) and then set a password.
It will then resave the document in the same folder it was in as a PDF. The original doc will NOT be password protected, but the new PDF will.
More Info: https://linuxapt.com/blog/19-make-documents-read-only-in-google-drive