Your dog just has to have one flea bite him and it sets off the allergic reaction. The area you describe is the most common place for a moist dermatitis (hot spot) for form due to flea allergy. It can be corrected though and I've been through it myself with one of my rotties who had a flea allergy. Flea sprays in the yard are in effective as rain and even dew can make it ineffective. There is a product called Diatomaceous earth that is tiny pieces of crushed fossils. This helps kill fleas and other small insects by cutting the exoskeleton until they die. It can be spread on dry yards to kill insects like fleas in the yard. You should wear a mask when applying. It can also be used in carpets to reach into the padding and crevices without using poisons. You put it down and walk on it a day or two so it gets into the carpet and padding, then vacuum up what is still visible. Some owners will even use it on their dog itself. Besides not letting them breath it in, it is harmless. It can be purchased at garden shops. I've personally used this for over 10 years or more. It works very well.
You might also consider a nobite collar to stop your dog from being able to reach the area. It prevents your dog from reaching the area. It is less invasive than the cones. Here is a site that does have them.
You might also be able to make a bite free collar as well with some heavy plastic and velcro.
Now a method that I've seen some breeders use is to add a portion of a teaspoon of flea dip into a jar of Vaseline and mix well. They then use this on the area after cleaning it well with a mild betadine solution or hydrogen peroxide. It helps protect the skin and keep any possible flea from biting in that area. Some swear by this method and the ones I know see improvement within a week.
Prednisone is an antiinflammatory medication and helps with the itchiness. Most vets will prescribe this as necessary. You might also ask about atopica. Read more on that here:
If other methods haven't been working, atopica might.
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