Inclusion Criteria

DISEASE CHARACTERISTICS:

- Histologically confirmed transitional cell carcinoma (TCC) of the bladder meeting ≥ 1
of the following criteria:

- Noninvasive papillary carcinoma (Ta) with ≥ 1 of the following characteristics:

- Recurrence of bladder tumor(s) ≥ grade 2 within 6 months after
transurethral resection (TUR)

- Three or more bladder tumors ≥ grade 2 at the time of TUR

- Bladder tumor(s) ≥ 5 cm in size and ≥ grade 2 at the time of TUR

- Any grade 3 bladder tumor(s)

- Carcinoma in situ (Tis)

- At least grade 2 tumor that invades the subepithelial connective tissue (T1)

- Has undergone TUR of all visible bladder lesions within the past 21 to 60 days with
biopsy of the underlying bladder wall for all tumors and cold-cup biopsy of all
suspicious areas

- No metastatic disease as confirmed by negative radiology within the past 16 weeks,
including the following:

- Chest x-ray

- Imaging of the upper urinary tract by 1 of the following methods:

- CT scan, MRI, or ultrasound of the abdomen and pelvis

- Intravenous pyelogram

- Retrograde pyelogram

- No evidence of TCC of the upper urinary tract

- No mixed histology of bladder cancer (i.e., TCC and squamous cell carcinoma of the
bladder or TCC and small cell carcinoma of the bladder) at the most recent TUR

PATIENT CHARACTERISTICS:

- ECOG performance status 0-2

- Life expectancy > 5 years

- Negative routine urine microscopy and negative urine culture within the past 14 days

- Willing to complete quality of life questionnaires in English or French

- Inability to complete questionnaires due to illiteracy in English or French,
loss of sight, or other reason allowed

- WBC ≥ 3,000/mm³

- Absolute neutrophil count ≥ 1,500/mm³

- Platelet count ≥ 100,000/mm³

- Bilirubin ≤ 1.5 times upper limit of normal (ULN)

- AST and ALT ≤ 1.5 times ULN

- Alkaline phosphatase ≤ 1.5 times ULN

- Creatinine ≤ 1.5 times ULN

- Not pregnant or nursing

- Negative pregnancy test

- Fertile patients must use effective contraception during and for 3 months after study
completion

- No significant history of cardiac disease including, but not limited to, any of the
following:

- Uncontrolled high blood pressure

- Unstable angina

- Congestive heart failure

- Myocardial infarction within the past year

- Cardiac ventricular arrhythmias requiring medication

- No active urinary tract infection

- No active infection, including tuberculosis

- No serious underlying medical conditions that would impair the ability of the patient
to receive protocol treatment

- No febrile illness or gross hematuria

- No impaired immune response from any cause (congenital, therapy, or disease)

- No clinically significant or untreated ophthalmologic condition (e.g., Sjögren's
syndrome)

- No gastrointestinal conditions (e.g., Crohn's disease or ulcerative colitis)

- No history of psychiatric or neurological disorder that would limit study compliance

- No other malignancies except for adequately treated nonmelanoma skin cancer,
curatively treated in situ cancer of the cervix, or other solid tumors curatively
treated with no evidence of disease for ≥ 5 years

- No contraindications to spinal or general anesthesia as required for a TUR

- No known hypersensitivity to BCG or gefitinib

- No history of allergic reactions attributed to compounds of similar chemical or
biologic composition to the study drugs

PRIOR CONCURRENT THERAPY:

- See Disease Characteristics

- More than 12 months since prior intravesical immunotherapy (including BCG +/-
interferon)

- More than 6 months since prior intravesical chemotherapy (including mitomycin C,
thiotepa, doxorubicin hydrochloride)

- Single dose of intravesical mitomycin C at the time of the most recent TUR
(within the past 21 to 60 days) allowed if considered standard care

- No other prior or concurrent immune modulator therapy

- No prior pelvic radiation

- No prior gefitinib

- No other concurrent experimental anticancer drugs

- No concurrent use of drugs that induce CYP3A4 enzymes that have been shown to
significantly reduce plasma concentrations of gefitinib (including phenytoin,
carbamazepine, barbiturates, rifampin, or Hypericum perforatum [St. John's wort])

- No concurrent grapefruit juice