I was reviewing the first drafts of an assignment and two students clearly copied from each other, but the similarity reports did not identify this. Is this a bug in Turnitin?
No, this is not a bug, it is a feature. Before the assignment deadline, student submissions within the course are not compared against each other, only against all other documents in the Turnitin database. Once the assignment deadline passes, student submissions within the course are compared against each other and the similarity report is regenerated. For most students, this results in no change. For students that are copying from each other, it will be identified in the new similarity report.