Here is the atached schematic of the clamping diode condition. Isolated the connection to contoller and kept the end open. When USB input is varied above 5V the expected output is diode cathode voltage (5V) + diode drop, which I was getting when im simulating the same.
I suspect it's because your +5V supply can't sink current. In simulation, that 5V source will stay at 5V no matter what, but on the bench that 60 ohm resistor can probably provide plenty of current for your 5V circuitry and then some. Unless your power supply has the capability to sink current in order to maintain the output voltage at 5V, that 5V node will drift up to the input voltage until something dies and shorts. You can verify if this is the case by measuring your +5V supply to see if it tracks USB VCC.