The correct answer is E: Prednisone.
The associated image and described biopsy findings are consistent with the diagnosis of Sweet’s syndrome (aka acute febrile neutrophilic dermatosis), which typically presents with tender, erythematous edematous papules and plaques over the face and upper extremities. A vesiculobullous or pustular presentation is frequently associated with underlying myelogenous leukemia. Systemic steroids (e.g. prednisone), typically for 4-6 weeks, is the first line treatment for Sweet’s syndrome barring any contraindications. Furthermore, an excellent response to systemic steroids is one of the minor diagnostic criteria for Sweet’s syndrome.
Potassium iodide, dapsone, and colchicine are considered 2nd line agents in the treatment of Sweet’s syndrome. There have been rare case reports of thalidomide being effective for recalcitrant Sweet’s syndrome.