Since Similac is a milk-based formula, it is unlikely to be from the milk itself. One thing which is common with changes in the diet, especially when switching from formula to milk, is a corresponding change in bowel movements, either causing constipation or diarrhea. While you did not mention it, diarrhea can cause a rash like you described.
I would recommend trying a gradual switch to milk: begin by using 1/4 milk and 3/4 formula. After three to four days, increase to half milk; try 3/4 milk three to four days later. If everything goes smoothly, he should be on whole milk by the end of two weeks. If the rash recurs on the whole milk, I would consider having him tested for milk allergy, although this would be unlikely if he can use Similac. Alternatively, you could use some hydrocortisone briefly for recurrence of the rash. Do not use this for more than one week without consulting a physician, however.
Finally, consider other reasons for the rash: diapers, soaps, detergents, powders, etc. Remember that an allergic reaction to any substance can develop at any time, even if it has been used daily for his entire life.
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