Infected with pox (a disease), or used as a general insult to describe something worthless, diseased, or of very poor quality.
From 'pox' (a disease with pustules) plus '-y' (adjective suffix). Used literally for disease, but by the 1600s became a general curse word.
Poxy was a perfect insult in the age of syphilis—calling someone 'poxy' meant wishing them the most feared disease of their time, which is why it remained an insult even after syphilis became treatable.
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