With a proliferation of distributed energy resources integrated into electric distribution systems, secure and economic operation of distribution systems becomes more challenges, while conventional distribution system control architecture is expected to experience a transformation. In this paper, a bi-layer control architecture is proposed, in which the upper layer executes a distributed economic dispatch (ED) and the lower layer conducts individual DERs' droop control. Specifically, minimum generation cost is pursued through incremental cost (IC) consensus among all DERs, and an efficient update law is explored to guarantee convergence of the consensus algorithm. Furthermore, optimal ED decisions are dynamically incorporated into individual DERs' droop controllers by setting primary frequency control references. A bi-layer ED-droop co-simulation framework is developed to verify the proposed control scheme. A 4-bus medium-voltage primary distribution system is built in PSCAD, and the IC consensus based economic dispatch model is implemented in MATLAB. Furthermore, sensitivity analysis is conducted to explore optimal coordination between the two layers for the best tradeoff between power output tracking and total system generation cost.