The guy isn't bad medicine because he's bad in the traditional sense, he's bad because of the side effects he gives the singer. Verse B can describe the effects a crush has on you or the adverse effects of medicine, hence the bad medicine thing.
I love this song so much I've been inspired to write a ratchet urban bop called "K.Y.S.S." (pronounced Kiss). Bonus points if you can guess what it stands for.