Lady had KCS (dry eye) in one eye. It is a result of her diabetes/nerve damage. She sees an opthamoligist.
My regular vet tried cyclosporin (Restasis for humans), but it didn't do much good. We have had much better results with the newer FK5061.
It's also important to use artificial tears 4-6 times a day to prevent eye ulcers and eventual blindness. You can get Lubriderm from your vet, but I prefer Genteal Severe Eye Gel. (It has to be the gel, not the drops because they last longer).
My opthamoligist also gave me a great gel for cleaning the debris that collects around the eye area and causes irritation. It's called Blephagel and is wonderful!
Lady is not a candidate for the surgery because of her age, but I would certainly consider it for a puppy. It is a very long surgery, several hours, and very expensive, though.