The One With Joey's Award - S7-E18
Trivia: The original script for this featured a subplot with Ross seeing Chandler exiting a male strip club, with obvious confusion and assumptions, with Chandler later admitting he only goes there because he likes the sandwiches. Matthew Perry shut the idea down. He's barely in this episode, possibly as a result of this subplot being excised and it being simpler to expand the existing scenes rather than write a whole new Chandler-centric section.
Answer: Usually by the seventh night of Hanukkah you don't know what to get the other person, and you will probably resort to getting the other person something insignificant. Chandler is basically saying that the pen is a stupid gift.