H.H.
Hi N.!
My daughter had the same kind of thing going on around her mouth and we pretty much determined it was from the binky and drool. I used Aquaphor ( there's an awesome kind specially for babies) and it really seemed to do the trick, although it took a while. I just put it on twice a day, morning and bedtime, and it made a HUGE difference. My doctor also suggested using Bacitracin 2x daily, but I found I had better luck with the baby Aquaphor.
Check with your doc if it's stubborn.
Goodluck!! H.