Long cigar
What Barry said -
The entire lower tube turns inside the sierra tube. The transmission is held in the upper tube by friction just like a standard cigar.
The trick for me is to get the length of the pen right (you have to make it as ling as the tubes plus the thickness of the ground down coupler - I always forget that) and to drill the entire length keeping the center in line all the way through. I've tried 3 times and have 2 good pens to show for it.
I have had success turning the blank round and mounting it in my chuck. I use a jacobs chuck in the tailstock and drill on the lathe. I drill the hole for the larger (sierra) tube from one end. I change to a 1/4" taper length (long) bit and drill the rest of the way through.
Then I swap the blank around and line it up to drill the smaller (cigar) hole from the opposite end. You have the 1/4" hole to center on. The critical piece is to make sure the blank is perfectly centered in the chuck and that it runs true.
If everything lines up after you're done drilling, glue in the tubes. I do the sierra one first, bottoming it out in the hole. Then stick a transfer punch inside that tube and blue the cigar tube in the other end. The punch keeps the cigar tube from going in too far and protruding into the sierra tube.