Plagarism by a co-author in my paper
I would suggest you try education first. Point the other student to the paper you found and remind them that copying without citation is plagiarism. Perhaps they just aren't yet aware of the academic rules if they are new at this. But, say that had it gotten into the paper it would reflect badly on everyone. 

If you get pushback, rather than an apology, then you can think about reporting it to your own advisor. Let them take if further if needed. 

My answer would probably be different if there were an advisor-advisee relationship between you. But for people not your supervisor you can try a low-key approach first.