RATIONALE: Drugs used in chemotherapy use different ways to stop cancer cells from dividing so they stop growing or die. Some cancers become resistant to chemotherapy drugs. Combining PSC-833 with chemotherapy may reduce resistance to the drug and allow more cancer cells to be killed.

PURPOSE: Phase I trial to study the effectiveness of PSC-833 plus etoposide and mitoxantrone in treating children who have refractory or relapsed acute leukemia.

OBJECTIVES: I. Determine the maximum tolerated dose of PSC-833 in combination with mitoxantrone and etoposide in children with refractory or relapsed acute leukemia. II. Determine the effects of PSC-833 on mitoxantrone and etoposide pharmacokinetics. III. Quantify MDR1 gene expression and MDR1 P-glycoprotein expression and function in patient-derived leukemia cells.

OUTLINE: This is a dose escalation study of PSC-833. Patients undergo induction therapy consisting of etoposide IV and mitoxantrone IV on days 1-5. Patients then receive PSC-833 IV over 124 hours beginning on day 2. A second course is administered no sooner than 21 days from the start of the first course if the marrow is hypocellular after the first course. Patients with persistent disease after 2 induction courses are removed from the study. Patients receive a total of 3 courses of etoposide/mitoxantrone. Patients who achieve complete remission after 1 induction course receive 2 courses of etoposide/mitoxantrone with PSC-833 as consolidation, beginning within 4 weeks of attainment of complete remission. Patients who achieve complete remission after 2 induction courses receive 1 course of etoposide/mitoxantrone with PSC-833 as consolidation. Cohorts of 3-6 patients receive escalating doses of PSC-833 until the maximum tolerated dose is determined. Patients are followed every 6 months.

PROJECTED ACCRUAL: At least 3 patients will be accrued for this study.

• Drug: etoposide
• Drug: mitoxantrone hydrochloride
• Drug: valspodar

DISEASE CHARACTERISTICS: Hematologic malignancies as follows: Acute myeloid leukemia (AML) in one of the following categories: First relapse if initial CR less than 6 months Refractory to first or second induction with daunomycin, cytarabine, and thioguanine (DAT) or other anthracycline-containing regimens Relapse following bone marrow transplantation provided good trilineage engraftment followed transplant and greater than 6 months since transplant Presentation with secondary AML or AML evolving from myelodysplastic syndrome Acute lymphocytic leukemia in one of the following categories: In second or subsequent relapse or failed second or later induction attempts regardless of prior remissions Relapsed following bone marrow transplantation provided good trilineage engraftment followed transplant and greater than 6 months since transplant No isolated CNS or extramedullary relapse

PATIENT CHARACTERISTICS: Age: Under 22 at diagnosis Performance status: Karnofsky 50-100% (ECOG 0-2) Lansky 40-100% (in patients under 12 years of age) Life expectancy: At least 8 weeks Hematopoietic: Not specified Hepatic: Bilirubin less than 1.5 mg/dL ALT less than twice normal Renal: Creatinine normal for age (within 2 standard deviations) OR Glomular filtration rate at least 70 mL/min Albumin at least 3 g/dL Cardiovascular: Ejection fraction greater than 50% at rest or with 5% increase with exercise OR Shortening fraction greater than 27% by echocardiogram No history of clinical heart failure Other: No uncontrolled infection No anticonvulsant therapy No history of allergic reactions or anaphylaxis to etoposide not remediable by premedication Not pregnant or nursing Fertile patients must use effective contraception Third percentile weight for height

PRIOR CONCURRENT THERAPY: Biologic therapy: See Disease Characteristics Chemotherapy: See Disease Characteristics At least 4 weeks since chemotherapy and recovered Prior cumulative anthracycline dose no greater than 360 mg per square meter Hydroxyurea therapy allowed just prior to study for rapidly rising blast count Endocrine therapy: Not specified Radiotherapy: Not specified Surgery: Not specified