"I never understood" is similar to "I still don't understand". The failure to understand happened/started in the past and still continues. "I never had a surprise party for my birthday." From the past to now, no one gave me a surprise party *hint hint*

The word 'never' shows that his lack of understanding goes back a long way. This is why the past tense is used. The present tense wouldn't work here. If you said 'I never understand' , 'never' would change its meaning to 'whenever' or 'every time'. This is not what the writer intends - he wants to focus on the length of time that his confusion has lasted. For me, the most appropriate tense here would be 'I've never really understood what that is'. The present perfect would encompass the idea that his lack of understanding was continuing into the present time. He didn't understand what the pill was when he first heard about it, and he still doesn't fully understand. This is an American text, and US English often avoids the present perfect in favour of the past simple. This is one case where the use of a present perfect would make the sense clearer.