OBJECTIVES: The social security system in Austria constringes insured people to pay a fixed co-payment of €4.80 per prescribed drug unit. Under certain conditions insured are exempted (e.g. very poor people). In 2008 the Austrian government implemented a co-payment limit for prescription drugs, called REGO. If the insured have paid 2% of their annual net income for co-payment rates, they are exempted from these co-payments for the rest of the year. We analyzed the effects of REGO on the prescription volume and therewith demand and on the total expenditures for prescription drugs. METHODS: We estimated hypothetical expenditures and prescriptions for 2008 under the assumption that REGO had not been implemented, using the historical data of 2006, 2007 and 2008 on different autoregressive process models. RESULTS:  Our analysis showed that the demand increases when prescription drugs become free, and therewith is price elastic. We estimate that approximately 40% of the increase in prescription volume results from REGO. Additionally to the increase in expenditures the sickness funds are facing a loss of income as less co-payment rates are paid. Prescriptions with prices lower than the co-payment rate are not paid by the insured anymore, but by the sickness funds. These low-price prescriptions cause a dramatic increase in volume, however, not a decisive increase in total expenditures. CONCLUSIONS: The time courses allow us to evaluate the effects of REGO. Furthermore they reveal information about the behaviour of the demand function, when the price drops to zero. The intention of REGO is to improve equity by protecting poorer and heavy users of prescription drugs from the financial burden of co-payments. Demand increases, when REGO reduces the price for prescription drugs to € 0. This could indicate an improvement in equity and access, however, affects on efficiency have to be shown in further analysis.