RATIONALE: Thalidomide may stop the growth of multiple myeloma by stopping blood flow to the cancer cells. Drugs used in chemotherapy use different ways to stop cancer cells from dividing so they stop growing or die. Combining thalidomide with chemotherapy may kill more cancer cells.

PURPOSE: Phase II trial to study the effectiveness of thalidomide, doxorubicin, and dexamethasone in treating patients who have untreated stage II or stage III multiple myeloma.

OBJECTIVES: I. Determine the response rate of patients with previously untreated stage II or III multiple myeloma treated with thalidomide, doxorubicin, and dexamethasone. II. Determine the safety and toxicity of this regimen in this patient population.

OUTLINE: Patients receive oral dexamethasone on days 1-4, 9-12, and 17-20, doxorubicin IV on day 1, and oral thalidomide daily. Treatment repeats every 30 days for 4 courses in the absence of unacceptable toxicity or disease progression.

PROJECTED ACCRUAL: A total of 21-45 patients will be accrued for this study within approximately 1 year.

DISEASE CHARACTERISTICS: Histologically confirmed multiple myeloma Stage II disease Symptomatic due to progressive disease OR Stage III disease No stage I multiple myeloma or smoldering myeloma

PATIENT CHARACTERISTICS: Age: 18 and over Performance status: ECOG 0-3 Life expectancy: More than 4 months Hematopoietic: Absolute granulocyte count at least 1,500/mm3* Platelet count at least 100,000/mm3* *Unless due to multiple myeloma Hepatic: Bilirubin no greater than 2.0 mg/dL ALT and AST no greater than 3 times upper limit of normal (ULN) Alkaline phosphatase no greater than 3 times ULN Renal: Elevated creatinine allowed Cardiovascular: LVEF at least 50% by MUGA or ECHO No active angina No myocardial infarction within the past 6 months Other: Not pregnant or nursing Negative pregnancy test Fertile patients must use effective contraception at least 4 weeks prior to, during, and for at least 4 weeks after study No grade II or greater pre-existing neuropathy No other concurrent or prior active malignancy within the past 2 years except adequately treated non-melanoma skin cancer or carcinoma in situ of the cervix Prior T1a or T1b prostate cancer (detected incidentally at transurethral resection of prostate (TURP) and comprising less than 5% of resected tissue) allowed if PSA normal since TURP HIV negative No AIDS-related illness No other medical condition that would preclude study

PRIOR CONCURRENT THERAPY: Biologic therapy: Not specified Chemotherapy: No prior chemotherapy for multiple myeloma Endocrine therapy: No more than 1 course of prior pulse dexamethasone Prior steroids of less than 1 month duration for emergent indications or life-threatening lesions (e.g., hypercalcemia or spinal cord compromise) allowed Radiotherapy: Prior radiotherapy allowed Surgery: Not specified