This is a very tough habit to break.
Your grandson has lip licker's dermatitis- it is a habitual licking of the lips which causes a contact dermatitis. Initially he likely felt that his lips were dry- which improved with moistening them with saliva. However, the saliva is irritating and can dry out the lips even more, creating a viscious cycle.
You may need to apply a bland moisturizer (one without perfumes, medications, etc.), as often as hourly, so your grandson won't feel the need to lick his lips. I think that lanolin works really well. At bed time, a larger amount is needed to lessen lip licking while sleeping. You may also apply a low dose corticosteroid cream 1% to the area surrounding the lips to decrease the inflammation.
But most importantly, he needs to stop licking his lips!
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