Lenalidomide and Azacitidine in Treating Patients With Advanced Myelodysplastic Syndromes

DISEASE CHARACTERISTICS: * Diagnosis of myelodysplastic syndromes (MDS) meeting one of the following criteria: * French-American-British histological classification criteria * Refractory anemia with excess blasts (RAEB), defined as 5-19% myeloblasts in the bone marrow * Patients with 20% blasts are considered to have acute myeloid leukemia (per WHO classification system) and are therefore excluded in this study * Chronic myelomonocytic leukemia (CMML), defined as 10-19% myeloblasts in the bone marrow and/or 5-19% blasts in the blood * WHO histological classification criteria * RAEB-1, defined as 5-9% myeloblasts in the bone marrow * RAEB-2, defined as 10-19% myeloblasts in the bone marrow and/or 5-19% blasts in the blood * CMML-2, defined as 10-19% myeloblasts in the bone marrow and/or 5-19% blasts in the blood * International Prognostic Scoring System (IPSS) score of intermediate 2 (1.5-2.0 points based on karyotype, cytopenias, and bone marrow blast percentage) or high (≥ 2.5 points), in the setting of ≥ 5% myeloblasts * Considered ineligible for bone marrow transplantation as first-line therapy PATIENT CHARACTERISTICS: * Life expectancy ≥ 3 months * ECOG performance status 0-2 * Not pregnant or nursing * Negative pregnancy test * Fertile patients must use effective double-method contraception for 4 weeks before, during, and for 4 weeks after completion of study treatment * No serious medical condition, laboratory abnormality, or psychiatric illness that, in the opinion of the treating physician, would preclude study participation or preclude giving informed consent * No preexisting neurotoxicity or neuropathy ≥ grade 2 * No rash or prior hypersensitivity or allergic reaction ≥ grade 3 to thalidomide * Creatinine ≤ 2.0 mg/dL * AST and ALT ≤ 2.0 times upper limit of normal * Bilirubin ≤ 2 mg/dL * Platelet count ≥ 50,000/mm\^3 * Absolute neutrophil count ≥ 500/mm\^3 * No other malignancy within the past 3 years except curatively treated carcinoma in situ of the cervix or nonmelanoma skin cancer * No history of thromboembolic event or other condition requiring use of anticoagulation with warfarin or low molecular-weight heparin * No known or suspected hypersensitivity to azacitidine or mannitol PRIOR CONCURRENT THERAPY: * More than 28 days since prior and no other concurrent investigational agents for MDS * More than 28 days since prior approved therapy for MDS * More than 14 days since prior growth factors * More than 28 days since prior and no concurrent supraphysiologic doses (equivalent to \> 10 mg/day of prednisone) of corticosteroids * More than 12 months since prior radiotherapy, chemotherapy, or cytotoxic therapy for treatment of conditions other than MDS * No prior lenalidomide or azacitidine * No prior stem cell or bone marrow transplantation * No concurrent androgens, epoetin alfa, or chemotherapy for MDS