Nathan Bomey, and Kevin McCoy

USA TODAY

Pharmaceutical firm Pfizer's $160 billion merger with fellow drug giant Allergan died Wednesday, just days after the Obama administration revealed new rules designed to undercut this type of tax inversion deal.

The collapse dashes New York-based Pfizer's hopes of lowering its U.S. tax bill by shifting its tax base overseas to Allergan's Irish home.

The companies said they agreed to ditch the deal that would have put Pfizer's fibromylagia treatment Lyrica and erectile dysfunction drug Viagra under the same umbrella as Allergan's wrinkle treatment Botox and dry-eye treatment Restasis.

Pfizer will pay Allergan a breakup fee of $150 million.

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The deal's demise came after President Obama and presidential candidates on both sides of the aisle lambasted tax loopholes allowing inversions in certain instances.

Obama on Tuesday called inversions "one of the most insidious tax loopholes out there." Democratic presidential contenders Hillary Clinton and Bernie Sanders and Republican candidate Donald Trump have been particularly critical of inversions.

Other companies that have pursued inversions have come under fire, such as Milwaukee-based manufacturer Johnson Controls' proposed merger with Ireland-based Tyco International.

Corporate leaders have blasted U.S. laws they say make it prohibitively expensive to maintain tax headquarters in America — with Pfizer CEO Ian Read among those bemoaning the situation. He and others contend that foreign competitors in lower-tax countries gain a financial edge.

"Treasury's building a wall around the U.S. to keep people in," Allergan CEO Brent Saunders said during a Wednesday conference call with Wall Street analysts. "Global companies, inverted or just foreign-domiciled, are going to be advantaged in buying U.S. companies as long as this is the tax code and scheme that the U.S. government wants to have. I'm patriotic, and I don't want to get on a soap box, but I think's it's incredibly misguided and unproductive policy for the United States."

Pfizer (PFE) and Allergan (AGN) pledged to chart independent growth strategies pegged to their respective pipelines of potential new pharmaceutical therapies.

Pfizer said that it would continue to consider a separation into two separate companies — one that would sell highly profitable, newer drugs and one that would sell established drugs, likely including off-patent therapies that have generic competition.

“Pfizer approached this transaction from a position of strength and viewed the potential combination as an accelerator of existing strategies,” Read said in a statement.

Pfizer-Allergan deal clouded by new inversion rules

Allergan said it will maintain its Ireland base and have an estimated 14% tax rate — far lower than the 35% top federal interest rate for businesses and that the new Treasury rules won't affect its previous U.S. acquisitions.

The company also is on track to complete the sale of a substantial portion of its generic drug business to Israel-based Teva Pharmaceuticals by June, Saunders said. Allergan will continue to examine potential acquisitions of growth companies, and may use cash from the Teva deal to fund a share buyback effort, he said.

Treasury's new rules on inversions exclude the value of the foreign target's last three years of acquisitions when determining the tax benefits of such deals.

That threatened the Pfizer-Allergan accord because Allergan has completed three major deals in the last three years, including its $66 billion merger with Actavis and its the $25 billion acquisition of Forest Laboratories, S&P Global Market Intelligence analyst Jeffrey Loo said Tuesday in a research note.

Without considering those moves, Allergan is too small of an inversion partner for Pfizer to reap any substantive tax benefits, rendering the deal pointless from a tax perspective.

Pfizer shares rose 5% to close at $32.93. Allergan shares climbed 3.5% to $244.74.

Contributing: Gregory Korte

Follow USA TODAY reporters Nathan Bomey and Kevin McCoy on Twitter: @NathanBomey, @kmccoynyc