with my lips it grows skin and depending when i peel it has another layer under... a more healthy layer. I don't know if its a good thing or bad thing.
But my lips were similar to yours now at an early stage. they would peel always raw and red. if it can be reversed, i'll assume your closer to healthy lips than me. In college i try to ignore it... but when girls approach me, i find myself making excuses.. just like in high school. they probably don't notice but i'm obviously fully aware of the situation...a good lip moisturizer is definitely needed in my everyday life.