Pfizer and Allergan won't be merging after all, the companies announced Wednesday.

U.S. drugmaker Pfizer and Irish competitor Allergan were planning to combine into the largest pharmaceutical giant in the world.

But the agreement worth at least $150 billion has been terminated because of a recent change in U.S. tax rules.

NPR's Jim Zarroli explained the policy shift on the blog yesterday:

"The Treasury Department on Monday introduced rules aimed at reducing the incentives for companies to carry out inversions. That's a controversial practice in which a U.S. company merges with a firm in a foreign country, such as Ireland, and moves its headquarters there to take advantage of that nation's lower tax rate."In most cases, the move is something of a legal fig leaf, because the company continues to operate in the U.S. in much the same manner as before."President Obama today called inversions 'one of the most insidious tax loopholes out there.' He said they allow companies to remain in the U.S., taking advantage of its infrastructure and legal system, adding: 'But they effectively renounce their citizenship. They declare that they're based somewhere else, thereby getting all the reward of being an American company without fulfilling the responsibilities of paying their taxes the way everybody else is supposed to pay them.'"Critics say inversions have become more common because the U.S. corporate tax rate is higher than any other developed country's, at least on paper. Unlike other countries, the U.S. also requires its companies to pay taxes on income they earn anywhere in the world."

The change in rules was substantive enough to reduce the advantages expected from the merger, Pfizer says.

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