Aetna confirmed on Tuesday that it will pay Humana a $1bn break fee after the merger between the two US health insurers was knocked down earlier this year by a federal judge.

The news puts a formal end to what was planned as a $37bn tie-up that would have re-painted the landscape of the American health insurance industry.

“While we continue to believe that a combined company would create greater value for health care consumers through improved affordability and quality, the current environment makes it too challenging to continue pursuing the transaction,” said Aetna chief executive Mark Bertolini.

US District Judge John Bates ruled last month that the deal would have reduced competition, saying that: “The court is unpersuaded that the efficiencies generated by the merger will be sufficient to mitigate the anti-competitive effects for consumers in the challenged markets.”

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