Allergens can be inhaled, contact or ingested. We need to look at food allergies. Some dogs no matter how long the are on a food can be come allergic.
The most common causes of food allergies in dogs are beef, dairy products, chicken, lamb, fish, chicken eggs, corn, wheat, and soy.
The first thing I would do is to have the dog into the Vet for some blood work to rule out any medical issues for Thyroid, Yeast infection, Mites, Pyoderma which is a skin infection or Mange. I would have the dog on a good Topical Flea Preventative like Frontline Plus or Advantage ll for dogs. This will help with any flea issues.
Many times we see dogs have this type of issue due to food allergies. The following article discusses how to do a food trial in-depth this is the same instructions that is given out at most Vet offices. It is recommended to try a different protein source such as duck, rabbit, kangaroo or Bison and grain free We often see dogs do well on a different protein only to develop an allergy to this as well later down the road. Purina HA or Science diet ZD are top of the line allergen diets. These foods have had the molecules broken down to the point that the body can not identify what they are getting thereby eliminating all chance of an allergic reaction
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When trying a food trail it is very important that they get no other foods no treats or human foods as this will void out the food trial. This can take 6-8 weeks to show improvement so you must stick with it.
For Bathing you can use Aveeno Oatmeal Colloidal Bath, that can be used on a regular basis to help with the itching. Some of the products sold at the Pet shops can actually aggravate the issues.
Until you can get this started you can try plain Benedryl to help relieve some of the itching. It can be given at 1-2 mgs per pound of body weight every 8 hours. This is only a first aid measure and is like a band aid over a major surgery. It is only a temporary measure.
There is a Medication that can be gotten via the Vet called Atopica. it is used for allergies and has been found to be a blessing for dogs with year round allergies. http://www.peteducation.com/article.cfm?c=0+1275+2010&aid=3069
Atopica is much safer than the steroids that are usually offered for this type of problem. As it does not contain the steroids which can put weight on a dog as well as steroid related issues.
Since he s Diabetic I would talk with the Vet about a special non allergic food to see if may make a difference. Purina Has H/A and Science Diet has Z/D. The Molecules are broken down to prevent allergic reactions.
The Omega 6 fatty acids are also a good supplement for skin issues and can be given safely to a dog with allergies.http://www.drsfostersmith.com/pic/article.cfm?aid=1060
I believe if you see and consult the Vet first and rule out medical issues, then try the change in Diet, Atopica, Omega 6, Probiotics and use the Aveeno bath first you may find the key to helping your baby stay itch free. There is a spray leave on conditioner called Resicort that helps and has been proved very effectiive.