Pfizer and Allergan have cancelled their $150 billion merger agreement, which would have created the largest pharma giant in the world.

The agreement was terminated because of a recent change in U.S. tax rules.

NPR’s Jim Zarroli explained the policy shift:

“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.”

According to Pfizer, the change in rules was impactful enough to reduce the advantages expected from the merger.

Pfizer paid Allergan $150 million to cover expenses related to calling off the deal.