hi there! my daughter around the same age developed a lip-picking habit when she was processing new information or was on overload-- it was a sensory input that she used to self-regulate.
advice given to me: pair the behavior you want to extinguish with another sensory input. i gave her a koosh ball to hold whenever i saw her lip-pick-- to compete with the picking. it was mostly while she was read a story and taking it all in, so now i have her automatically hold a koosh when we read together. i tell her: "let's go get koosh-- he loves to read with us!" when she went back to lip-picking, i would say, "where's koosh? hold koosh with both hands so he can see the book!" i wouldn't focus on the lip-picking at all but on the new behavior of playing with koosh.
after a couple weeks, she stopped lip-picking totally. you can also use a squeeze ball or a soft animal to stroke-- anything sensory.
hope this helps!