RATIONALE: Drugs used in chemotherapy use different ways to stop tumor cells from dividing so they stop growing or die. It is not yet known if chemotherapy given before surgery is more effective with or without docetaxel given before or after surgery for breast cancer.

PURPOSE: Randomized phase III trial to compare the effectiveness of chemotherapy using doxorubicin and cyclophosphamide with or without docetaxel in treating women who have stage II or stage III breast cancer.

OBJECTIVES: I. Compare overall and disease-free survival in patients with operable adenocarcinoma of the breast treated with 4 courses of preoperative doxorubicin and cyclophosphamide (AC) alone vs 4 courses of preoperative or postoperative docetaxel (TXT) following 4 courses of preoperative AC. II. Evaluate whether the addition of preoperative TXT to preoperative AC results in improved rates of clinical and pathologic locoregional tumor response. III. Assess whether the addition of preoperative TXT to preoperative AC results in improved rates of breast conservation. IV. Assess whether postoperative TXT improves disease-free and overall survival in patients who receive preoperative AC, especially in certain subgroups of patients (e.g., those with pathologically positive nodes).

OUTLINE: This is a randomized, multicenter study. Patients are stratified according to age (under 50 vs 50 and over), clinical tumor size (less than 2.1 cm vs 2.1-4.0 cm vs greater than 4.0 cm), clinical nodal status (negative vs positive), and participating center. Patients are randomized to one of three treatment arms. Arm I: Patients receive doxorubicin IV followed by cyclophosphamide IV over 30 minutes to 2 hours on day 1 every 21 days for 4 courses. Patients receive oral tamoxifen daily for 5 years, starting on day 1. After completion of chemotherapy, patients are offered surgery (e.g., lumpectomy with axillary node dissection, or modified radical mastectomy). Post-operative radiotherapy is given post-lumpectomy. Arm II: Patients receive doxorubicin IV followed by cyclophosphamide IV over 30 minutes to 2 hours followed by docetaxel IV over 1 hour on day 1 once every 21 days for 4 courses. Patients receive oral tamoxifen daily for 5 years, starting on day 1. After the completion of chemotherapy, surgery is offered (as in arm I). Radiotherapy follows surgery in post-lumpectomy patients. Arm III: Patients receive doxorubicin IV followed by cyclophosphamide IV over 30 minutes to 2 hours on day 1 every 21 days for 4 courses. Patients receive oral tamoxifen daily for 5 years, starting on day 1. After completion of chemotherapy, surgery is offered (as in arm I). After surgical recovery, docetaxel IV is given over 1 hour once every 21 days for 4 courses. Radiotherapy follows docetaxel in post-lumpectomy patients. Chemotherapy is repeated every 21 days for 4 courses in the absence of disease progression or unacceptable toxicity. Patients are followed every 6 months for 5 years, and then annually thereafter.

PROJECTED ACCRUAL: Approximately 2,400 patients will be accrued for this study within 5 years.

DISEASE CHARACTERISTICS: Histologically or cytologically proven invasive adenocarcinoma of the breast Fine-needle aspiration is acceptable Core or Tru-cut biopsies are preferable No more than 63 days between initial diagnosis and randomization Tumor palpable on clinical exam and confined to the breast and ipsilateral axilla If clinically negative axillary nodes (N0): primary tumor greater than 1 cm (T1c-T3) If clinically positive axillary nodes (N1): any size primary tumor (T1-3) No N2 disease, i.e., ipsilateral nodes clinically fixed to one another or to other structures No skeletal pain unless: Bone scan and/or roentgenologic exam negative for metastatic disease Suspicious findings confirmed as benign by x-ray, MRI, or biopsy No ulceration, erythema, skin infiltration (complete fixation), or peau d'orange, or skin edema of any magnitude Tethering or dimpling of skin or nipple inversion allowed No bilateral malignancy Suspicious contralateral mass proven benign on biopsy allowed None of the following unless proven benign on biopsy: Suspicious palpable nodes in contralateral axilla Palpable supraclavicular or infraclavicular nodes Hormone receptor status: Any status

PATIENT CHARACTERISTICS: Age: Any age Sex: Female Menopausal status: Not specified Performance status: Not specified Life expectancy: At least 10 years (exclusive of cancer diagnosis) Hematopoietic: WBC at least 4,000/mm3 Platelet count at least 100,000/mm3 Hepatic: Bilirubin normal AST/ALT normal Alkaline phosphatase normal Renal: Creatinine normal Cardiovascular: No active cardiac disease that would preclude doxorubicin, e.g.: Documented myocardial infarction History of congestive heart failure Angina pectoris requiring medication Valvular disease with documented cardiac function compromise Arrhythmia associated with heart failure or cardiac dysfunction Poorly controlled hypertension, i.e., diastolic blood pressure greater than 100 mm Hg Cardiomegaly on chest x-ray or ventricular hypertrophy on EKG unless left ventricular ejection fraction at least 45% by MUGA Other: No other malignancy within the past 10 years except: Segmentally resected lobular carcinoma in situ of the ipsilateral or contralateral breast Effectively treated nonmelanomatous skin cancer Surgically treated carcinoma in situ of the cervix No systemic disease that would preclude therapy No psychiatric or addictive disorder that would preclude informed consent Geographically accessible for follow-up Not pregnant

PRIOR CONCURRENT THERAPY: No prior therapy for breast cancer No prior anthracyclines for any malignancy No concurrent sex hormones (e.g., birth control pills or ovarian replacement therapy)