Drugs charity DrugScope said the group of six inmates and former inmates who used heroin and other opiates were on the verge of settling out of court with the Prison Service after suing the Home Office.
The case - alleging the "cold turkey" withdrawal treatment they were forced to undergo amounted to assault - was scheduled to start at the High Court today.
The size of the payouts under discussion have not been revealed.
But the compensation levels are due to be finalised tomorrow or Wednesday, legal sources said.
Shadow home secretary David Davis said the case set a "disastrous" precedent and accused Home Secretary John Reid of failing to protect the public.
Mr Davis said: "Presumably the Government does not want to be embarrassed by losing such a case under its own human rights legislation.
"Drugs are a scourge on society and completely undermine all our other efforts to fight crime. By doing this Mr Reid would be letting down the taxpayer, the victims of these offenders and the drug addicts themselves. The precedent would be disastrous."
He added: "This would be a massive failure of political nerve by Mr Reid and a massive failure in his core duty to protect the public."
Former Tory prisons minister Ann Widdecombe said: "It's an insult to every victim and every law abiding person.
"As far as I'm concerned there is no human right to continue a drug habit when you go to prison.
"This Prison Service will be paying out money it should not be."
Convicts should have no option but to go cold turkey once they passed through the prison gates, she said.
"The fact is they do not because there's a ready supply inside," she added.
If she had still been a Home Office minister, she would have ordered prison chiefs not to pay up, she said
High Court judge Mr Justice Langstaff gave the go-ahead in May for a full hearing of the case.
It focused on six test cases chosen from a total pool of 198 claimants.
When finally resolved this week, all 198 may be handed compensation by the Prison Service - with sums potentially running into tens of thousands of pounds.
Mr Justice Langstaff said in May: "All claim that their treatment was handled inappropriately and so they suffered injuries and had difficulties with their withdrawal."
Barrister for the claimants Richard Hermer told the court at the time: "Many of the prisoners were receiving methadone treatment before they entered prison and were upset at the short period of treatment using opiates they encountered in jail.
"Imposing the short, sharp detoxification is the issue."
The prisoners were bringing the action based on trespass, because they say they did not consent to the treatment, and for alleged clinical negligence.
They also claimed human rights breaches under Articles 3 and 14 of the European Convention on Human Rights, which ban discrimination, torture or inhuman or degrading treatment or punishment and Article 8, which enshrines the right to respect for private life.
A Home Office spokeswoman said: "It would be inappropriate to comment because the litigation is still ongoing."
Prison Reform Trust director Juliet Lyon said: "The outcome of this case could cause courts to pause for thought before using a prison sentence as a gateway to treatment.
"Our overcrowded jails are awash with petty, persistent offenders who commit crime to feed their drug habit.
"Rather than trying, and failing, to turn prisons into hospitals, the government needs to get to grips with drugs policy, invest in community health treatment for addictions and use prison for drug barons, not downtrodden mules and homeless addicts."
A Department of Health spokeswoman said there had been no cuts to drug treatment funding in prisons.
The department was spending £12 million during this financial year, supplemented by the Home Office, on a programme to increase drug treatment for prisoners, to allow them to fight their addiction before their release into the community, she said.
"The commitment to fund this programme for both this financial year and the next, has in no way been affected by reforms within the NHS."
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