The linear bicharacteristic scheme (LBS) is a classical leapfrog algorithm, but is combined with upwind bias in the spatial derivatives. This approach preserves the time-reversibility of the leapfrog algorithm, which results in no dissipation, and it permits more flexibility by the ability to adopt a characteristic based method. The use of characteristic variables allows the LBS to treat the outer computational boundaries naturally using the exact compatibility equations. The LBS offers a central storage approach with lower dispersion than the Yee algorithm, plus it generalizes much easier to nonuniform grids. It has previously been applied to two and three-dimensional free-space electromagnetic propagation and scattering problems. This paper extends the LBS to model lossy dielectric and magnetic materials. Results are presented for several one-dimensional model problems, and the FDTD algorithm is chosen as a convenient reference for comparison.