The Defense Department has decided against giving U.S. troops stationed in the Persian Gulf an experimental chemical warfare drug after new tests suggested it posed potentially life-threatening hazards and might be less effective than originally thought.

No soldiers were given the drug, Multi Shield, a skin cream that initial tests suggested would be effective in protecting them from the blistering effects of mustard gas. The Army contracted for 1 million bottles last fall at $3 million and about 200,000 bottles were shipped to an Army depot.

But the Army killed the order after discovering problems in the manufacturing process so critical that the military essentially was receiving a different product from the one it had contracted for. The Army says it will destroy the 200,000 bottles it has acquired, and recover any that may have been shipped to the gulf.

"We terminated the contract for Multi Shield because of composition and purity problems," said Chuck Dasey, a spokesman for the Army Medical Research and Development Command at Fort Detrick, Md. He said when the manufacturer, Interpro Inc., of Haverhill, Mass., started to produce a large amount, "the composition of the product changed in a way that it wasn't what had been successfully tested earlier."

The drug was to be carried by soldiers in small plastic bottles. In the event of chemical attack, it was to be rubbed on their necks or wrists, places where gas masks, gloves or chemical suits might not offer 100 percent protection.

Batches of Multi Shield initially tested by the Army last fall passed safety and effectiveness hurdles. However, more recent animal studies of the cream as it came off the product line raised serious questions in the minds of Food and Drug Administration and Defense Department officials.

Side effects included irritation and some skin edema. In some cases the edema was so severe that some officials feared soldiers would be overwhelmed by itching or pain and forced to rip off gas masks in an attempt to relieve the symptoms. This could be a potentially fatal act in a chemical warfare environment, two government sources said.

"I can go as far as to say the matter is being reviewed by the Department of Defense inspector general and FDA officials," a defense official said.

One source said Interpro, a family owned firm, had to hire a subcontractor to help it fulfill the contract.

A spokesman for Interpro declined comment. The firm has received a "show cause" order from the Pentagon, which a source described as the first legal step in terminating a contract.

Under a new and controversial process established in December, the Defense Department may ask the FDA for a special waiver of regulations governing informed consent and order service personnel to use experimental drugs without obtaining their permission. As a result of the process, which was challenged unsuccessfully in court by the Public Citizen Litigation Group, such waivers have been granted for two other chemical warfare drugs.

FDA spokesman Jeff Nesbit yesterday would say only, "We very thoroughly reviewed the safety and effectiveness data for all of these products and if we had questions we raised them with the Pentagon."

The Army withdrew its request for a Multi Shield waiver Jan. 18. One government source said the FDA has been "under staggering pressure" from the Army "to find everything okay" with Multi Shield and the two other experimental drugs because of continuing fear that chemicals will be used by Iraqi President Saddam Hussein.