I would just be direct with your friend and tell them that you don't want to hang out with the toxic person and tell them exactly why you feel that person's toxic.

Start off being nice about it but if your friend isn't willing to compromise then tell them either don't include the toxic person to our meetups or we won't hang out anymore.

That's how I am with people. I don't expect a friendship to last me more than 2-3 years so if the friendship becomes a threat to my mental health then I have no issues kicking said friends out of my life early.