Saying “Yarhamuk Allah (may Allah have mercy on you)” to a person who sneezes, if he says “Al hamdu Lillah (praise be to Allah),” is a communal obligation, in the sense that if one person says it, the obligation is waived for the others. If no one among those who hear him says it, then all have sinned, because of the report narrated by Abu Hurayrah (may Allah be pleased with him) who said: The Messenger of Allah (blessings and peace of Allah be upon him) said: “There are five things that the Muslim must do for his brother: returning the greeting of salaam, saying ‘Yarhamuk Allah’ to one who sneezes…”

Narrated by Muslim (4022) 

Shaykh al-Islam Ibn Taymiyah (may Allah have mercy on him) said: Our companions and others differed concerning visiting one who is sick, saying “Yarhamuk Allah” to one who sneezes and initiating the greeting of salaam. What the texts indicate is that these things are waajib (obligatory), and it is said that it is a communal obligation.

End quote from al-Fataawa al-Kubra, 1/443 

Secondly: 

If a person sneezes more than three times, you should not say “Yarhamuk Allah” to him; rather you should pray for well-being for him, because of what is narrated in al-Muwatta’ (1521) from ‘Abdullah ibn Abi Bakr from his father, that the Messenger of Allah (blessings and peace of Allah be upon him) said: “If he sneezes, say ‘Yarhamuk Allah’ to him; then if he sneezes, say ‘Yarhamuk Allah’ to him; then if he sneezes, say ‘Yarhamuk Allah’ to him; then if he sneezes, say: ‘You have a cold.” ‘Abdullah said: I do not know whether that is after the third or fourth time. 

And it was narrated that Salamah ibn al-Akwa‘ (may Allah be pleased with him) said: The Messenger of Allah (blessings and peace of Allah be upon him) said: “The one who sneezes may be told Yarhamuk-Allaah three times; if he sneezes more than that, he has a cold.” Narrated by Ibn Maajah (3704); classed as saheeh by al-Albaani in Saheeh Sunan Ibn Maajah. 

An-Nawawi (may Allah have mercy on him) said: If a person sneezes several times in a row, the Sunnah is to say “Yarhamuk Allah” each time until he reaches three. We narrated in Saheeh Muslim, Sunan Abi Dawood and at-Tirmidhi from Salamah ibn al-Akwa‘ (may Allah be pleased with him) that he heard the Prophet (blessings and peace of Allah be upon him) say, when a man sneezed in his presence, “Yarhamuk Allah.” Then he sneezed again, and the Messenger of Allah (blessings and peace of Allah be upon him) said: “The man has a cold.” This wording is the report narrated by Muslim. 

As for the report narrated by Abu Dawood and at-Tirmidhi, they said: A man sneezed in the presence of the Messenger of Allah (blessings and peace of Allah be upon him) whilst I [the narrator] was watching, and the Messenger of Allah (blessings and peace of Allah be upon him) said: “Yarhamuk Allah.” Then the man sneezed a second or third time and the Messenger of Allah (blessings and peace of Allah be upon him) said: “Yarhamuk Allah, this is a man who has a cold.”

At-Tirmidhi said: A saheeh hasan hadeeth. End quote from Kitaab al-Adhkaar, 1/273 

Shaykh Ibn ‘Uthaymeen (may Allah have mercy on him) was asked: Is it obligatory to say “Yarhamuk Allah” to one who sneezes once, and if he sneezes three times to repeat that three times or more? 

He replied: If he sneezes three times and you say “Yarhamuk Allah” each time, then after the third sneeze you should say to him: “ ‘Aafaaka Allah (may Allah grant you well-being); because that is a cold, so say: May Allah grant you well-being; you have a cold. All you have to say is: May Allah grant you well-being, and you may add: You have a cold. 

End quote from Liqa’ al-Baab al-Maftooh, no. 127 

And Allah knows best.