Poor pupper I know in the human world, dermatological problems can be tough to diagnose and difficult to treat. It certainly looks liike some sort of irritation. What's Blu's history? Any food sensitivities, any new products being used in the house, exposure to anything outdoors? The drainage aspect is definitely perplexing as is the spreading nature. My thought was some sort of contact dermitis. Hope the vet can figure it out for you! Please check back after your visit. Hugs to Blu...feel better soon sweetheart!