In this paper it is mentioned that
... octenidine can release iodine radicals from the PVP complex, resulting in a tissue irritation as well as strong brown to violet discolouration in the border areas.
but elsewhere I read that
... it turns out that ΔG > 0 for radical iodination.
I have seen and experienced the purple discoloration of combining octenidine with pvp-iodine. The stain parts after a few days. However, I have not found any reports of skin irritation so far, except for the quote above. Iodine radicals could cause skin irritation, so if the first statement ist true, that would at least in theory support the hypothesis that skin irritation could occur.
Bonus question: How would you explain the purple colour of the reaction?
Disclaimer: I am a medical doctor interested in understanding the chemical background of the drug interaction of these two bactericidal skin disinfectants, which is often warned about on the ward.
-- EDIT: Additional background info, helped me to understand the problem:
This journal article mentions in its introduction:
Use of iodine as an antiseptic has gone into disrepute as a result of its short lasting action and irritant properties. Strong solution of iodine is corrosive and can cause blistering and necrosis of skin, commonly referred to as chemical burns or irritant contact dermatitis. Iodine has thus been replaced by substances known as iodophores that contain an iodine molecule linked to a large molecular-weight organic compound. A slow release of iodine from the polymer contributes to a long lasting action and a low irritant profile of such compounds. Povidone iodine is one such iodophore that has poor irritant property despite preserved antiseptic efficacy, and hence is advocated as a non-irritant, non-toxic compound for surgical scrubbing and disinfection of endoscopes.