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