It sounds like it could be a sebaceous or follicular cyst.
http://www.neaa.net/cyst.shtml
You can try wiping the area with a benzoil peroxide pad and then using neosporin or triple antibiotic ointment on it to see if that clears it up. If the skin looks like its becoming sore discontinue the wipe and just use the ointment.
Or you can see if a veterinary dermatologist will give you more help than your vet has
http://www.acvd.org/public/findaderm/index.htm
Hope this helps you!
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