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It describes a lot of people or animals dying in a short time. Flies only live for a few days, and you often find dead or dying flies on their back on window-sills. Imagine hundreds and hundreds of flies flying around; every few minutes a fly drops to the ground and dies.
It's usually used in a semi-humorous context, so it would not be appropriate, for example, in a serious news report about a sudden outbreak of a fatal disease.
“drop like flies” 
Re: “drop like flies” 
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