My Lady was diagnosed with KCS a couple of years ago at age 11. We tried cyclosporin (the active ingredient in Optimmune), but it didn't really help her produce tears. I now get Tacrolimus compounded through Lady's opthamoligist and the results have been amazing!
As far as artificial tears, Genteal Severe Eyel Gel (not drops) works the best. You need a gel to really coat the eye and last longer. I liked Genteal better than Lubrithol, the gel Lady's opthamolgist prescribed for her.
Buy GenTeal Lubricant Eye Gel, Extra Value Twin Pack Online at drugstore.com
Did your vet discuss possible surgery since your Yorkie is so young? In addition to the discomfort, dogs with dry eye are more prone to corneal ulcers. They also build up scar tissue on the surface of the eye over time which can lead to blindness.
Lady is not a candidate for surgery because of her age and health issues, but if she were younger I would look into it. Surgical options are discussed in the last paragraph:
KCS (Dry Eye)