The pharmaceutical industry, who said it was not involved in the panel's decision, will be thrilled at the news, as it continues to struggle to recruit enough suitable patients for clinical trials.
Patient recruitment is now consuming thirty per cent of clinical trial time - more time than any other clinical trial activity - and almost half of all trial delays result from patient recruitment problems.
These delays are costing drug companies over half a million dollars for specialty products and more than $8m (€6.7m) for blockbuster brands in lost sales and are also causing the cost of running clinical trials to skyrocket.
Meanwhile, the 2.3m-strong US prison population remains an untapped resource for patients who are perfect for clinical trials, including racial minorities, women, as well as people with mental illness and communicable diseases such as HIV/AIDS, hepatitis C, and tuberculosis.
Drug testing on prison inmates was common until the early 1970s, until revelations of unethical testing, abuse and mistreatment came to light, at which point the practice was stopped and new legislation imposing tight restrictions was passed in 1978.
Currently prisoners are only allowed to participate in government financed biomedical research if the experiment poses no more than "minimal" risks.
However, in light of the current patient recruitment shortage, the Department of Health and Human Services' Office for Human Research Protections commissioned the Institute of Medicine in 2004 to review the ethical considerations of the resumption of more detailed research involving prisoners - the report of which was released on August 1.
The advisory panel insisted that the primary purpose of the report was to examine the welfare of prisoners, and whether they could benefit by a regulation change to allow them to participate in trials - their end conclusion was yes.
"Prisoners have been exploited in the past, carrying a heavier burden of risks than the general population, however, research can impart benefits - responsible research has the potential of improving health and well being of prisoners as well as improving the conditions in which they live," said the report.
"Of course, adherence to the highest ethical values is critically important in designing and conducting human research involving prisoners."
The panel insisted that prisoners should be allowed to take part in government financed clinical trials as long as the trials were in the later and less-dangerous phase of Food and Drug Administration (FDA) approval.
They also insisted that safeguards be put in place to protect against any abuse and made it clear that in any new legislation the issue of informed consent would need to be dealt with adequately, particularly the nature of the consent, the adequacy of the information given, as well as the competence and freedom of the prisoners to make a choice.
It was also recommended that at least half the subjects in such trials be non-prisoners, so as to make doubly sure that what experiments are good enough for the prisoners is also good enough for the general population.
Furthermore, all studies should be conducted under independent review, states the report.